Simplified by Cowrywise: Saving and Investing for Beginners

‘Simplified by Cowrywise – Saving and Investing for Beginners was a virtual event put together to help beginners understand the steps needed to start saving and investing successfully. Simplified by Cowrywise is periodically held to help break down how money works for everyday people. At the Simplified event held in May, Orifunke Lawal, Founder of Lady with Balls and Enor Izomor, Customer Experience Manager at Cowrywise shared actionable steps for anyone who’s just beginning their wealth journey. This summary of the session is for you if you feel like you don’t know exactly where to start. Read it and share your lessons with us in the comments. Oh, and remember to share with your friends too!

How Orifunke imbibed a savings culture

In 2018, Orifunke signed up on Cowrywise but didn’t begin saving immediately. She felt like she didn’t have enough money and was being paid peanuts. For her first year of work, she was basically just winging it and didn’t have any savings because she thought that her income was too little to live on.

In her words, she gave “excuses” that it was impossible to save when she needed to spend money on numerous expenses. However, when she changed jobs and increased her income but still wasn’t saving, she knew there was a problem.

By Dec 2018, her career mentor called and probed (we all need people who know how to lovingly probe!) her about how much she had in savings. Her response was “let’s just be thanking God”. ?

She was earning but it didn’t feel like she was earning enough. Thankfully, her conversation with this mentor changed the course of things and she was put on a regimen that helped her to stay accountable.

Saving and investing for beginners – The power of accountability

Orifunke had to “report” to her mentor on her savings progress every month and her savings plans had to be locked. (Only Cowrywise currently offers you locked plans to help you stay disciplined.)

That’s how she developed a savings culture. 

When it comes to saving and investing for beginners, people think it starts with the desire to save but discipline is important. You might not feel like saving but you can start with the discipline even if you don’t have the desire yet.

At first, it also doesn’t matter how small you start with, as long as you develop the habit of saving periodically. So that when you start earning more, you would have successfully built the discipline needed to save more.

Understand your capacity

Two people may be earning 30K and have the same number of responsibilities or expenses. Person A may be able to save about 20% or 30% of what they earn while person B may struggle to save any percentage. 

In this case, it might be that person A developed a savings culture when they were young which has now become a habit that’s hard to break. Therefore, come rain, come shine, they always pay themselves first by saving. 

While person B, who has the same responsibilities as person A may be used to spending all the money they make. This is why person B struggles to even put aside any amount because the habit hasn’t been developed yet.

Here’s the lesson here – first understand your appetite as a result of your upbringing, exposure and expenses. When you understand your personal savings capacity, you can do more when it’s required or go a little less if what you currently do is too much.

Can you save 3K every day?

In 2018, the same year Orifunke became serious about saving, she saw a Tweet that someone said they saved 3K every day. That pressured her to start saving 2K every day because if she can believe it then she can achieve it. ?

However, it was such a struggle to keep up. Imagine moving from being someone who didn’t save at all to wanting to save every single day.

Of course, this is possible but for most people, it’s not realistic. It could lead to a time when you can’t keep up and will then withdraw from saving anything because it becomes a “hard” thing to do.

Make the process as easy as possible for yourself so that it is enjoyable and not detestable.

When it comes to saving and investing for beginners, choose consistency over intensity.

Be wary of lifestyle inflation

Lifestyle inflation happens when you begin to spend more because your income increased.

When people earn less, they’re not saving because they think they can’t afford it. But even when they get a pay raise, they still don’t save!

Most people start buying more expensive things when their income increases so pay attention to lifestyle inflation and fix it.

It’s why people can work for 10 years, and earn more with different job promotions but still have no significant savings. It’s because as they earn more, they spend more instead of saving more. 

To curb or fix this, pay attention to your expenses so that you don’t spend up to what you earn, spend all that you earn. ?

Accountability – we’re talking about this again!?

Even though it was embarrassing, it helped that Orifunke opened up to her career mentor who was able to help.

It is the custom in Nigeria to be very secretive about money matters but if things aren’t adding up, find someone you trust who can help.

With the topic of saving and investing for beginners, it can be hard if you don’t have any accountability. Even if you’ve worked for many years and feel like you’re starting late, remember that as they say “whenever you wake up is your morning”.

As long as you wake up!

How Enor started saving and investing

Enor’s personal motivation for saving and investing began after her conversation with her boss, our CEO ?. He handed her a sheet of paper to write down different goals she intended to achieve in the next few months and years.

In her list, she had goals like vacation ?, masters ??‍?, etc.

Then her boss asked her “Can you afford to do any of the things on this list right now?”

It made her realize that it’s almost impossible to do anything without proper planning. Also, it brought about the realization that she needed to start setting apart funds for different aspects of her life.

That’s what helped her get started.

Define your goals or not ?

Though Enor started saving properly in 2018, her goals were still vague. However, she’s glad that it didn’t stop her.

This means that it’s ok for you to start now even if you don’t yet have defined goals.

In 2019, adulting happened when Enor realized that she needed money for an apartment. That’s when she had a defined goal and channelled her savings towards that.

Irrespective of whether you have goals or not, just start. So that when you have specific goals, you will already have something to fall back on.

Plan, Plan and Plan again

Depending on when you get your income – weekly or monthly – start planning for your expenses. Cue a budget! A budget is an approximation of your income and expenses for a set (future) period of time.

You can set aside an amount to save once you understand and are clear about how much you spend weekly/monthly. 

For example, if you earn 50k and find out by using a budget that you spend 40k on all your expenses (feeding, housing, etc). It’ll be absurd to then set a goal of saving 40K every month from your income. That’ll mean that you will struggle through the month trying to cover your expenses.

Don’t save all your income because you’re trying harshly to be “ready for your future”. No aspire to perspire over here, do what suits your current lifestyle while you can try to earn more.

Essentially, work backwards by understanding your expenses and then consistently save a percentage of your income in a way that doesn’t set you up for failure.

No go dey do pass yourself

We’ve talked about not saving more than you can afford, but there’s also the part about not spending more than you can afford. Ask yourself if your current income can sustain your lifestyle. If your answer is “no”, then you need to work around reducing your expenses.

What are the things you spend money on right now that you can cut out because they’re liabilities and not assets?

What do you spend on that isn’t needed at the moment? In trying to make life more convenient than you can afford, you can end up spending way more money than is practical.

Your expenditure should never run into the same amount as your income or worse, and your expenditure should not cost more than you earn. No go dey (spend) pass yourself.

So, how much should you save and invest?

There is no one-size-fits-all when it comes to saving and investing for beginners or for anyone really. 

Understand where you are as it relates to your income and expenses and then fit your savings into that. 

In 2018, Enor could save 10% of her income and that was her cutting her “coat according to her size”. Now, she can conveniently save up to 40% of her income and it’s not because she has “blown”. It’s because she has a very clear knowledge of what’s left of her income after her monthly expenses, and is then able to put aside 40% without going into debt.

How is savings different from investments?

The risk level and duration are what differentiate savings and investments.

Savings are often focused on short-term goals between three months to one year while investments are for the long term like 3years, 5 years and above.

Examples of some savings goals are: rent, vacation, “detty December”, etc

While some investment goals can be investing in a child’s education when you don’t intend to have a child for a couple of years.

Imagine what could happen if you put your rent into a risky investment. ? Your landlord might not be happy if anything goes wrong. 

Look before you leap

It’s very easy to be swayed by returns, but know this and know peace – High returns equal high risk.

This is obvious but you do know that Ponzi and money doubling schemes are not investments, right?

As a beginner, the goal should first be to sustain your capital so you should not invest in any asset you do not understand. Even if you feel like you perfectly understand the asset, make decisions as a beginner based on the risk involved. 

Should you keep saving and investing when there’s inflation?

Inflation will always be a thing but think about this…

Which is a better option among these two scenarios – having 1 Million saved in 2022 that might be worth less than 1 Million in 2021 or not having 1 Million at all? ?

Everyone must start at the beginning

Sounds like tautology right?

Well, it’s the truth.

No one can escape starting at the beginning. It doesn’t matter if you feel like “everyone” has gone ahead of you when it comes to saving and investing. What matters most is that you start your own journey. Click the image below to get started.

What tips will you incorporate going forward?

Share with us in the comments.

To watch the full session, please click the link below and subscribe!

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