It Is Never Late To Start Saving

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According to a late 2018 survey by LendingTree, more than 50 % of Americans cannot cover a $1000 emergency with savings. Six in ten Americans have had an incident that cost them $1000 or more in the past year. One-third of Americans are currently in debt from an emergency expense that they could not cover. The situation in other counties is not much different. In the United Kingdom, one in four adults has no savings. The same applies to mainland Europe on average as well. This puts all these people on a very thin ice in case they lose their income and the job market is not favorable. A lot of them were hit hard by the COVID-19 lockdown.

The main question is why so many people lack savings?

Low income

If a person makes less than what is considered to be the minimum cost of living, then it is very hard to expect that they will be able to save. However, this is generally an excuse for people who fall under the next category.

Lack of knowledge about how to handle personal finances

A significant number of people do not adequately manage their finances. They do not save and/or invest but rather spend everything they earn on things they might not necessarily need. They even accumulate debt because of bad spending habits. An example of this could be someone buying a brand-new phone that costs one or two monthly salaries, while only using 2 % of its features.  A much cheaper phone would also work the same way, but it will not be as fashionable. One or two salaries might not sound much, but when put into perspective, it equals 10-20 % of the yearly income and this is only if the person remains employed.

So where do we start?


It is important to understand that having money does not make you good in managing it. There are many examples of rich people who went bankrupt due to bad financial management. Michael Jackson, 50 Cent, Nicolas Cage, Mike Tyson, and Kim Basinger, just to name a few. They all had millions at one point in their careers.

It is spending habits, not income. What is common between people who are good with money is that they are always looking for a way to live within their means.

The first step you should take is to look at your expenses, both one-off and recurring. You need to become your personal accountant. Start recording everything you spend money on, from a coffee to an electricity bill. Once you have that, organize it in categories such as utilities, groceries, transport, clothes etc. Then compare this with your sources of income. The more data you have, the better overview you will get over your financial situation.

There are many tools that can help you track and even automate your accounting. I personally use a free Excel template that I found online. I now have many years of data logged into it, which helped me make important decisions along the way, such as what car I can afford to buy.


Once you have an idea as to what your income and expenses look like, it is time to create your emergency fund. This is money that you keep for rainy days, such as the ones we live in right now. The basic rule is that you need to have enough to cover between three and six monthly expenses. And you only touch it in case of an emergency such as when you lose your job, or you need to pay for a medical bill. This is not money that you spend on expensive holidays and fancy gadgets.

Many people find this difficult. Yes, it is not easy, and you cannot achieve it within a month of two. It might take you a few years to get there. In order to do it, set yourself a goal that you will save at least 5 % of your income every month, until you reach the three-month threshold. It is up to you whether you will feel safe enough, or you will keep going till you reach the six-month threshold. I can guarantee you that it feels great to have money stacked away when you really need it.

Once you set your saving goal, review all your expenses and find a way to cut them. Cancel subscriptions that you do not use, set a limit for restaurant bills and commit that you will not throw food away as much as possible. When you feel tempted to buy something expensive, wait for a few days, make proper price research, and make sure that you really need it.


Having an emergency fund is great, but one of its downsides is that money gets depreciated over time. To overcome this, you will also need to invest. There are many investment strategies out there, so you will need to spend some time educating yourself. I strongly recommend reading “MONEY Master the Game: 7 Simple Steps to Financial Freedom” by Tony Robbins. It provides a great inside into personal financial management, especially for people who do not have experience with the topic. If you do not want to read the whole book, you can go for a summary from a company like Blinkist.

The main idea behind investing is that you set a goal and let your money work for you toward achieving it. This is also known as the power of compounding. It means that your money will develop year after year, allowing interest to build up. Let us say that you invest $100, and this generates a 10 % profit. If you leave the investment untouched, you will generate another 10 % on $110 the year after, then on $121 the following year, and so on.

A great example of compounding comes from Benjamin Franklin. When he died in 1790, he left $1000 to the cities of Boston and Philadelphia, specifically instructing that the money should be invested and not touched for 100 years. After the time passed, half a million was drawn from the investment account, and the rest was left untouched for another 100 years. By the end of the second period, the original sum transformed into $6.5 million.

Same as with the emergency fund, you should dedicate at least 5 % of your income to your investment portfolio each month. Ideally, you should aim for 10 – 15 % so that you can make a long-term impact on your financial future.

Having financial stability is one of the main factors towards achieving a stable and happier life. I am a strong supporter of the idea that Personal Finance should be a mandatory subject in schools, as a lot of young adults do not know what to do with their money. They get carried away by the fancy lifestyles shown by celebrities on social media. Some of them learn their lesson the hard way. Sadly, others never do.

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