Discipline of Saving

KPMG Uganda

Alfred Brian AGABA Internal Audit, Risk & Compliance Services

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Agenda

Saving- What is it?

Saving- Why?

Saving- When to start?

6 Personal Financial Management principles

8 Principles on Saving

Saving- Where is the money to save?

Saving- Where to save?

Some common sayings on saving

Conclusion

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Saving- What is it?

In a broader sense, saving is typically used to refer to economizing, cutting costs, or to rescue someone or something.

In terms of personal finance, saving refers to preserving money for future use - typically by putting it on deposit - this is distinct from investment where there is an element of risk.

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Saving- Why?

Assume four stages in Life:I. Childhood

II. Early employment

III. Mid/Top employment

IV. Retirement

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Saving- Why?

Life’s Stages vs. Income & Expenses

I II IVIII

Life’s Stages

Income Expenses

$

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Saving- Why?

Life Stages vs. Financing:

I. Childhood- Your parents

II. Early employment- Your earnings

III. Mid/Top employment- Your earnings

IV. Retirement- Who?????????- Your savings

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Saving- Why?

The main notion of saving is…

… coming to terms with the fact that a time will come when you will have needs to meet but will

not be earning. You should therefore use the time when you can earn to raise funds for the

time when you will not be earning.

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Saving- When to start?

Now!!!

“You have enough money to start saving”. Owino market vendors save Ushs 1,000 per day and

currently most of them stay in their own houses -simple they maybe, but they don’t rent.

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6 Personal Fin. Mgt. principles

i. “Live within your means”

ii. “Cut your coat according to the cloth’s size”

iii. “As far as possible, do not make credit a part of your lives” - many live at 130% - 150% of their earnings. i.e. Borrowing, salary advance, loan sharks etc to consume.

iv. “Be content”

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6 Personal Fin. Mgt. principles

v. “Do not spend to please others” - either they don’t care or they will only get jealous of what you have spent on.

vi. “The mark of adulthood is the ability to take responsibility for one’s actions”- Take personal responsibility for your finances and stop ‘blame-mania’.

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8 Principles on Saving

8) “It’s not what you earn but what you keep that determines your financial success in future”.

9) “If your dream is lifelong poverty, then generously pay the landlord, taxis, supermarket, school, friends but please DO NOT pay yourself”. Saving is actually paying yourself. It is arguably the hardest discipline in Personal Fin. Mgt. Consider saving, a current “expense” that will meet your future expenses.

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8 Saving principles

6) “Start by saving what you can afford”. Do not be over-ambitious. You might start saving a huge amount and give up shortly. The discipline is better than the amount. Once you have learnt the discipline, increase the amount.

7) “Save for a reason- when you save for nothing in particular, you spend the savings on nothing in particular” One could save for many reasons: for medical insurance, for land, for education, for rent, for investment, for retirement etc.

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8 Saving principles

4) “Save when it makes financial sense”. Loan interest might be lower than the increase in cost of land over the period of saving. In such a case, do not save for land, take a loan and buy the land then repay the loan.

5) “Close the leaking tap”. Some fail to save because many ‘money taps’ are leaking.

6) “Put it where you can’t reach it” if you do not trust yourself with keeping the money you have saved, then put it far from you- say a fixed deposit account or a SACCO etc.

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8 Saving principles

1) “Have a healthy balance between saving and consuming”.

Why eat posho and beans for 365 days a year because you are trying to save, yet you earn 5m per month? To the other extreme, why eat breakfast, lunch and supper at Serena everyday because you earn 5m per month? To know how much to save, you need to be able to strike a healthy balance.

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Saving- Where is the money to save?

i. “The best way to save money is not to lose it”. a. Consider changing to energy saving bulbs in your house.

They use less energy, last 10 times as long and produce less heat.

b. Turn lighting in the house off in the rooms where it’s not in use.

c. Plan on how much you are going to spend in a wedding meeting before the meeting starts.

d. For long personal calls, consider off-peak hours or arrange a meeting instead and avoid the call.

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Saving- Where is the money to save?

“The best way to save money is not to lose it”. (Cont’d)e. If you are flying, both first class fliers and economy class

reach destination at same time- except if it makes business sense.

f. Prepare a shopping list for food budgets before you go to shopping mall if you are an impulsive spender.

g. Change your lifestyle (middle to upper income earners)- why live in a 300k house when u earn 500k? Think of sharing houses where possible

h. Etc. etc. etc. think of your life, you will identify many more.

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Saving- Where is the money to save?

ii. “You can’t save money you don’t have-make it first”. a. Use your assets to make money for you: For example, I

had a car that I used to transport me and also as a special hire.

b. Re-align your assets to make them more valuable: For example, I sold the car and purchased a boda-boda that was half the price of the car but earned almost as much as the car.

c. Still young? Improve your skills: For example, I have earned some money from making business plans for companies. I read a lot and taught myself the skill.

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Saving- Where is the money to save?

“You can’t save money you don’t have-make it first”. (Cont’d)

d. Set up a business: You may set up a business from your hobbies or something you love doing. NB: Not everyone has what it takes to run a business.

e. Do not necessarily increase your spending after a salary increment: Increments are some of the most wasted resource. You may slightly increase your standard of living but make a deliberate effort to save or invest a bit of the excess.

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Saving- Where to save?

Time Horizon Objective Saving Vehicle

Short Term e.g. Emergency e.g. Savings account

Medium Term e.g. Education, Land

e.g. Fixed desposit account, staff SACCO

Long Term e.g. Retirement e.g. Stock Market, Real estate

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Accessibility of savings vs. Time period

Inaccessible

Accessible

ST LT

Time Period

Accessib

ility

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Some common sayings on saving

“ Saving is not for the faint hearted in life for it calls for assertiveness and self control ”

“Average people do not expect to succeed ”

“A key to your financial success is to treat your money or savings as your employees who must work for you. Stop working for money and let money work for you”

“Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted”

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Conclusion

““There is no poverty as great as the poverty of the mind. This is always expressed as ‘I can’t’ ‘it is impossible’”

No wonder, the average person is recorded as using only 10% of their brain capacity. Cemeteries are filled with

dead dreams and hopes because of our natural tendencies towards pessimism. You can be financially

successful, so start to dream again.

And dream BIG!!!!

Then Act!!!

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Presenter’s contact details

Alfred Brian AGABA

Internal Audit, Risk & Compliance Services

KPMG

+256-712-959-525

aagaba@kpmg.co.uk