APRIL 4 - Most people are conversant with the 50-30-20 rule on money, and its variations, as regards expenditure and savings. Whilst financial success can somewhat be attributed to saving every possible penny, building a hefty savings kitty should not take over one's life to the point where they are not enjoying the fruits of one's labour.
Being financially responsible is important, but it's also essential to enjoy life and take care of yourself. If you feel like you're just getting by, it might be time to find a better balance between saving and living.
If you constantly dip hands in your savings despite having a well-planned budget, it may be a sign that not enough is being set aside for fluctuating expenses. Saving consistently is important. However, a portion of the amount should remain flexible, as some expenses vary monthly due to factors like emergence of new hobbies, black tax, emergencies, or even new taxes. For example, saving 35,000 from an income of Ksh. 100,000, you could decide that Ksh. 20,000 is a fixed saving, Ksh. 10,000 goes to the emergency fund while the remaining Ksh. 5,000 is an allowance for an immediate emergency. If there is no quick emergency, the money goes to the savings account. Regularly adjusting the budget to account for such changes helps maintain a balance between saving and covering necessary expenses without depleting savings prematurely.
Another sign of excessive saving is a noticeable decline in social interactions. While it's wise to cut back on social spending if finances are tight, completely withdrawing from social activities can lead to isolation and a weakened sense of community. Over time, constantly turning down invitations may distance one from friends and important connections. Striking a balance is key--financial responsibility should not come at the cost of meaningful relationships. Finding ways to engage socially within one's budget ensures both financial stability and a fulfilling social life.
Cutting costs at the expense of personal grooming is neither healthy nor sustainable. Prioritizing savings over basic self-care can take a toll on self-esteem and how one is perceived by others. Neglecting one's appearance can have long-term effects on confidence and even professional opportunities which in a sense is counterproductive if one is looking to increase their income. Investing in oneself does not have to be extravagant as grooming matters, especially for those who want to be taken seriously. Avoid walking around looking dishevelled in the name of saving; there's always room for balance.
Create a solid budget outlining your needs, wants, savings, and fluctuating expenses. Then, develop a habit of spending only on items or experiences that bring you true happiness, so your spending feels worthwhile. By understanding your financial limitations, you can make informed decisions about how much you can afford to 'splurge' without compromising your long-term financial stability.
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A key recommendation to avoid over-saving is to consider directing some of your savings into financial products that provide a steady, guaranteed income stream. Since this income can be used without depleting one's core savings, it helps reduce financial stress and allows one to focus on what truly matters--enjoying the rewards of their hard work.
Additionally, think about working with a financial advisor. Their support can be invaluable in reaching your financial goals, particularly if you're feeling overwhelmed or unsure of the next steps. A financial advisor will help you clarify your reasons for saving, starting by understanding your aspirations and creating a personalized plan to achieve them. Their expert advice and unbiased perspective can help you make more informed and effective financial choices.
That being said, even though being an over-saver can come with its own set of regrets, it's better to be on the side of "saving too much" than "saving too little" or "saving just enough," because having a solid financial cushion can offer peace of mind and a greater sense of security for the future.
The writer is the Manager, Enwealth Capital Ltd
