Savings: It’s all about you – and not your salary level

Savings Wallet

No one ever regrets having a healthy bank account built through years of denying today’s pleasure to satisfy tomorrow’s need. The ability to be insulated from the effects of a sudden job loss or to be ready for retirement, children’s education, or other major life developments is as important as it is necessary.

Everyone admits to the benefits of savings, and so it’s surprising that we still come up with terrible savings figures, as reported in the National’s 2013 article “No savings for one in three Emiratis and a fifth of UAE expats”. Notable information from the report include:

  • 50% of UAE expats did not save at all, while 40% saved less than 10% of their income.
  • 25% of people in the UK have not saved for retirement.
  • 28% of the US population have no emergency savings.

We live in a world where credit is easily accessible and retailing has become very appealing with signature items such as the latest phones made easy to acquire through debt. Hence, one needs to make a conscious effort in order to build adequate savings.

Often, people live with the belief that it takes a good salary to save, or that decent savings require substantial amounts to begin with. But the only truth in these beliefs is how false they are. Let’s use the story of my friends (with names changed to protect their identities) to prove this. Meet Sandra, Anthony, Dennis and Mohammed. These are amazing individuals with great personalities.

Sandra is a sales floor agent at a mall. Due to her lack of education, her salary is the least of all four. In a recent conversation with her, I found out that she is living a life full of debt with seemingly no hope of escape. However, she carries a signature phone which cost almost her entire salary, and as you can guess, it was acquired on credit. When I asked her if she had savings or plans to save, her response echoed the beliefs of many other people I know. She was completely convinced that doubling her salary was the only way she could save. But, it is a known fact that attempting to double your salary in your current job or even while moving to another job is as unlikely as becoming a billionaire overnight. As a result, my dear friend Sandra, as it appears, is stuck in debt with no hope of having savings of her own one day.

Anthony, however, earns three times Sandra’s salary and yet he too, like Sandra, has no savings and is swimming in the pool of debt. Unlike Sandra, he is well-educated and better positioned to find a more high-paying job. In all our conversations, he expects to start saving when he moves on to a high paying job since his current salary is not adequate to save from.

Then there is Dennis, my executive friend. A highly educated person with a successful career. This successful career however does not seem to have any correlation with his ability to save. His current salary is 20 times Sandra’s. With his high salary, I was expecting Dennis to be different but there was no difference between him and my other two friends. Like the others, he was also heavy burdened with debt to my surprise and had no savings to his name.

It seems the more one earns, the more one spends and the more one exhibits what behavioral scientists call the “lack of self-control bias”. This is the situation where individuals focus a lot on today and ignore tomorrow adequately. By this, they tend to spend today and fail to save for tomorrow. This bias is considered one of the leading causes why people fail to save or save adequately to meet tomorrow’s need.

It has therefore become very clear to me and from my personal experience, that savings has no correlation with the level of ones salary. It is a state of mind. An attitude or a habit that needs to be built consciously over time.

The good news is that, everyone can save regardless of their salary level. With years of continuous practice, I have found the steps below very useful and applicable to all who want to build a savings habit. Today, I am unable to live without savings. As low as my salary was while I lived in Africa, I was able to finance a $50,000.00 plus-MBA Program from my savings and I believe everyone can achieve their dreams if they save well. The dream could be as diverse as financing an MBA, paying off an existing debt, financing your child’s college education, building your dream house, etc. One thing remains: a savings habit can help you achieve it.

Let’s break down the steps:

  • Personal decision. Work on your mind. Decide that you want to save, then you will save. You can never be better than what you think you are. The mind is the center of our being and the place where changes begin – so decide today to be a net saver and you will be. Decide to save a small portion of your income. Nothing big, nothing mathematical.  Just commit to a certain amount and never fail to save it.
  • Draw up a budget and stay committed to it. For every cent you earn, spend it according to a budget. Never spend any money that has no budget attached to it. The budget does not need to be sophisticated like that for a large company or a high net worth individual but at the minimum, budget for every knowable expense you make. It will surprise you how far this will take you. Again, that budget should include a portion allocated for savings.
  • Finally, be disciplined. Don’t go off the budget. You will realize in the beginning that since you are new to it, it’s quite difficult to cut down on certain items that fall outside the budget. It’s alright to struggle with the process initially; the important thing to remember when you stumble and fall is that you shouldn’t stay down. Work on sticking to it and with time, it will be a habit you can’t let go of.

Let me end with the story of Mohammed, the last of my four friends. A young man who never saved and had no debt. He lived within his means and had no need to go with the flow of fashion. After I met him, and following continuous discussions, he opened up to me and we realized that he was in the position to save close to 50% of his salary. Obviously, we started with a budget, which he has not been able to follow consistently. But gradually, he has been able to save enough to contribute 20% of the funds needed to make a real estate investment. He can’t stop thanking me, but he is yet to realize what he can do once he reaches a habitual savings stage.

These simple steps can also be applied consistently to take you out of debt. Just make up your mind, budget all of your income, target a minimum savings amount, spend only when it has been budgeted for, and finally, stay discipline to the budget.


Kwame provides advisory support to individuals looking to make this transition from debt to savings on a one-to-one basis. Send him an e-mail for more information.

Kwame is a Chartered Financial Analyst with several years’ experience in the finance industry, including banking. He is also a social worker dedicated to helping the needy in several fields including education and healthcare.