‘Pay yourself first’. This is a nice soundbite in financial management about the importance of remembering to keep some money for yourself in the seemingly endless list of expenditure that nibbles away at your income. A funny analogy I heard was to picture your expenses as a queue of people lined up waiting to receive their paycheck. You have the mortgage guy at the front, the gas and electricity girl next, the car payment dude and so on until we come to you standing sheepishly at the back after everyone has got their share! That ain’t right!
You’ve presumably worked hard for this money, so once you’ve created your effective budget, it’s only fair that you get the first fruits of your labour, right? Not quite. We have to remember that we don’t really own anything and that we are only stewards of God’s resources. With this in mind, it really should be, ‘Pay God first, pay yourself second.’ Not as catchy but a lot more effective.
I will still use the phrase, ‘Pay yourself first,’ however this is on the assumption that you’ve already paid the first 10% to God. With all that being said, let’s look at why it is so important to save regularly not just because it builds discipline but also because it provides a tried and trusted path to building generational wealth.
Why Should We save?
In Proverbs 21:20 (NLT) it says:
‘The wise have wealth and luxury, but fools spend whatever they get.’
The message here is clear and simple. If you are wise with your finances, you will have wealth and luxury, however, it is foolish to spend everything you earn.
I have spoken previously about the need to connect with your future self and to take action today for a better life tomorrow. We must stop thinking about only next week and next year, but seriously consider what our next five, ten and even thirty years are going to look like.
When I was a fresh-faced teenager learning to drive, I had a bad habit of looking only at the bit of road directly in front of the bonnet. This led to erratic movements to try and keep the car on course. My driving instructor then told me not to just look directly in front of the car, but rather I should focus far ahead on the road that we were travelling. This allowed me to get a clearer picture of where we were going and meant that I didn’t have to react to sudden situations as much. Looking far down the road is what should dictate our approach to saving and by association also our spending habits.
How Should We Save
As with any skill in life, saving requires strength and discipline to put into practice and also patience to see the results. Proverbs 11:16 (KJV) says:
‘A gracious woman retaineth honor, and strong men retain riches’
If saving was easy, then everyone would do it. However, with the rampant rise of consumerism and the ever increasing methods to get into debt, it really is only strong men (and women) who will retain their riches in this environment.
Your savings should really be divided into three categories:
Short term savings (0-1 Years)
- Emergency savings (3-6 months’ worth of expenses)
- Holiday Fund
- Christmas Gifts
Medium Term Saving (1-5 Years)
- Car Purchase
- House Deposit
- Wedding
Long Term (5 Years +)
- Retirement
- Private School Fees
- Building your house in the village
The above are only a few examples and I’m sure you can think of a few of your own.
Generally, for saving goals of less than five years, you should be saving in cash so that you can access the money quickly with little risk of the final value being less than you have saved. However, when saving for the long term (5 years + but ideally 10 or more), it may be better to invest some of the money in stocks and shares which are more risky in the short term but historically provide better returns over the long term.
Given the infancy of my blog, I have not yet written a guide to investing yet but it is definitely on my to do list. There is a lot to cover and I will eventually break it down into bitesized chunks. Thankfully, Vanguard have a lot of investment education resources on their website which you can find here.
Please note that there is no specific financial advice being given by myself. You will need to engage with a financial adviser if you want to obtain tailored financial advice to your individual circumstances. What is being provided is financial education to empower you to make informed decisions about growing your wealth.
How much Should We Save
There are lots of different saving levels that are possible but as a minimum you should aim to save at least 10% of your income. If you can save 20% and split this between long term and short term savings you’re doing well. If you can do even more, then great. The important thing is just to start, no matter how small, and to be consistent. Set up a standing order from your current account to your savings account so that you save automatically as soon as you get paid.
Thank you so much for taking the time to read through this and I hope it’s motivated you to start saving regularly!
God bless
Ten Talents
Leave a Reply