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Saving misunderstood by Uganda’s majority

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Saving misunderstood by Uganda’s majority

One may save using a wooden box

One may save using a wooden box

People continue to have a poor saving culture because saving is vaguely understood by most people.  In simple language if you earn you are expected to spend. If you cannot spend all that you have earned then you are left with a surplus which you may save.

The question now is:  what about if you have no surplus? If all you have earned is spent and nothing is left for you to save. If you don’t earn much and you can barely pay your bills, the idea of saving money might seem laughable.

Vast majority of the people claim to earn less than what they need to spend. This is now the dilemma.  If your expenditure is greater than your income, this means you cannot save but can only borrow to finance your expenditure.

It sounds unpractical but some people have testified that they spend more than what they earn.  At this level experts will advise you to cut your expenditure, either to break even or realize some surplus for saving.

Spending less than your income is the cornerstone to building wealth. It is powerful because every shilling you don’t spend immediately goes to build your wealth foundation, and has the potential to throw off investment returns for a lifetime. It’s also the cornerstone to wealth accumulation because if you can’t get your spending under consistent control, it is unlikely that you will ever get rich.

You can never know what will happen in the future. So, money should be saved to pay for unexpected events or emergencies and finance business projects.Most of us put in hundreds of hours of work each year to earn most of our money.

But when you have savings and stash your funds in the right places, your money starts to work for you. Over time, you will need to work less and less as your money works more and more, and eventually, you might be able to stop working altogether. This gives you financial independence and comfortable retirement.

Financial independence isn’t the same as being rich; but it’s about not having to depend on receiving a certain pay cheque from your employer at the end of a month.  It’s about making you feel rich beyond your wildest dreams.

Having savings that you can rely on is what it takes to become “rich,” no matter how you define it. The biggest question is:  Can saving be possible with a miserable income versus a bulging expenditure?

When analyzing the economics of civilizations, the usual question has always been: Where does the surplus go? In Greece, for example, surplus was generated by the labor of slaves, and went to the citizen (property owner), who tended to be a very good judge of where and how to use it best.

In Western civilization, surplus was generally left in the hands of the person who earned it, who also tended to be a good judge of how best to use it. Today surplus is partially left in our hands for us to decide where to put it.

Through the past hundred years of a declining Western civilization, the movement of surplus was radically transformed; it was skimmed away, in thicker and thicker layers, to growing governments in capital cities. The result of this is the current situation: Essentially all the surplus is skimmed away from the citizens.

This is accomplished with direct taxes, such as income taxes, as well as with the hidden tax of inflation, real estate taxes, sales taxes, and dozens of others. In other words, it’s so hard to save money because the government takes so much of it away.

Does this mean that we shouldn’t save? No, this only reminds us that we shall never realize a surplus for us to save. All we can do then is to reduce our unnecessary expenditure to be able to realize something to save.

This is now sacrificing. In fact some people have been advised to save a portion of their income first before they embark on expenditure. If you choose to spend first you will not be left with anything to save.

Secondly, saving can be a better motivation if you are saving to start another income generating project than saving to buy sofa set, television or any other item which does not bring more income. Saving to invest is an assurance that once the income generating activity starts to bring in money you will stop to save.

The irony is that currently government seems unbothered on whether people save or not. Instead government is busy encouraging consumption and expenditure.  Banks allow us to withdraw money any time from our savings accounts because we are even provided with ATM cards.

There is at ATM for the different commercial banks near every bar and recreational centre so that people access their money and spend. There is need for programs on financial literacy among the people.  Forced saving can also be used where people deliberately choose to avoid saving.



Isa Senkumba is a social critic

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