Raise your hand if you get excited at the sight of packages taped together with 2-for-1 tape or if you countdown to sales. Say ‘I’ if your toolkit is stocked with glue, nails and tape ready to repair rather than buy new. Shout ‘hear-hear’ if you have bottles turned top-side-down in your refrigerator or a toothpaste tube tightly wound on your vanity. We are a nation of savers through and through. It inspires us to innovate, to improvise, do-it-ourselves and beg a little brawta — after all every dollar counts.
Now raise your hand one more time if you’ve felt that it’s been hard at times to translate your efforts into deposits in your savings account. Hand up? It’s okay, it happens to just about everyone at some point, but on the bright side you’ve got us. Since we opened the doors of our building society 135 years ago we’ve learned a lot, and we’re proud of the work we’ve done helping savers to find their focus and build their financial lives.
Jamaica’s gross national savings, which accounts for both private and public savings, is 10.8%* of gross domestic product. It means we aren’t quite following the 50-30-20 rule as a nation. In case you’ve missed it, the 50-30-20 rule recommends you divvy up your monthly budget into 3 categories 50% for essentials (e.g. housing, food and transport), 30% for lifestyle (e.g. going out, shoe shopping, or cable) and 20% towards your finances — this is where you get into saving for your emergency fund, retirement or a new house for example. If you’re been happily hitting that 20% target this is where we high-five. If you’re not we’ve got some work to do.
We suspect this is where many of you say one of two things:
1. “I’ve been managing that 20% but not very happily — most of it is going to debt repayment and very little to rebuilding savings.” Our answer to this is keep debt repayment a priority but look around for opportunities to refinance so you can build an emergency fund. Or
2. “I simply haven’t got that 20% left for my finances,” and our reply to that is some tough love — it’s more likely you need to reprioritize, so let’s go:
Step One is to track your current allocation so you know exactly what’s going where, and figure out whether you’re currently 60-30-10 or 55-45-5. Get out all your bills and receipts for the last 3 months and write it all down:
- How much do you make each month after taxes?
- Your essential expenses: housing (mortgage/rent), utilities (electric, water/sewage and gas), daily transport, groceries
- Lifestyle choices: shopping, entertainment, eating out, gym, the salon, travel
- Finances: debt repayment, emergency fund, and other savings
- Work out your percentages for each month
Step Two, now that you have a clear view of our allocation it’s time for some housekeeping, if you’re over in the essentials category here are some tips for cutting down:
- Housing: if you’re renting it’s time to re-evaluate your rental. Renting isn’t your end goal so you may want to consider looking at more affordable housing solutions, and if you’re young and don’t have a lot of baggage, consider moving back in with family. If you own your own home then make sure you’re paying the best mortgage rate in the market, just half a percentage point can make a huge difference to your monthly payment. You could also consider getting a renter depending on the layout of your house.
- Utilities: the key to cutting down here is conservation — low-flow faucets and shower heads, quicker showers and teaching your children to switch off the tap while brushing their teeth minimise your water. Even putting a sealed 1½ litre bottle of water in your toilet tank can cut down of the amount of water used per flush. As for electricity — switch off when you’re not using, and plug out when you aren’t home, go with solar bulbs outdoors and compact fluorescents indoors.
- Transportation: plan your trips carefully and if you drive use 87 octane petrol unless you drive a race-car, really check your car’s manual, most of them don’t need 90. Also go easy on the gas pedal since quick acceleration burns more fuel and carpool when you can.
- Groceries: write a list, keep looking out for specials, plan your meals, buy generic and never shop hungry. You’re statistically proven to buy more junk when you are.
On to lifestyle choices, there is never any reason to go above 30 here if your 20% for finances isn’t covered, so if you are start trimming. It might not be easy at first but repeat after us – ONE LESS!
Okay now for that 20%: after you’ve covered debt repayment, we recommend you save in this order
- Emergency fund
- Retirement
- Insurance (your level of insurance should be a function of your dependents) and
- Saving for targets like home purchases.
It’s important that you save something, it’s a process but the important thing is that you’re motivated. That’s why you’re reading this post, it’s why you do all those quirky and amazing things you do to save money in your own way each day. Savers know that we are here for you and we’ll always be committed to helping you make the most of you savings by offering you loads more advice, higher interest rates, and #NoOrLowFees. And we don’t believe in minimum balance and dormant account fees, so if ever you fall off the savings wagon, we’re here so you can get up and get going again.
*Source: A 2013 estimate on www.cia.gov; calculated by deducting final consumption expenditure from gross national income.
