Saving on a tight budget

Some people will tell you they earn too little to save.

They are left with nothing after paying the bills and debts at the end of the month.

But experts say it is possible to save on a low income. The secret is budgeting and saving should be the top priority on your budget. The experts advise that you should always set aside money for savings just like you do for other expenses.

However, common practice is allocating money for other expenses before we can think of saving, if at all we are left with any money. Emanuel Nyalali, Special Assignments Manager, at the Dar Es Salaam Stock Exchange (DSE) says one of the challenges facing Tanzanians today, including the youth, is the lack of a saving culture. He says the belief is that only people with a lot of money can save, which is not true.

“This is a very big problem among Tanzanian youth and it is something that they inherit from their parents and the society.” Nyalali says before introduction of mobile money system, the saving culture was even worse because many youth could not go to the bank to deposit little money.

Iddy Shomari, for example, would not be saving at all were it not for mobile money system. The 26-year-old shop attendant does not have a bank account but sometimes saves money on his phone.

“I don’t save every month because my salary is too little. I save once in a while for emergencies like sickness.”

With a less than Sh200,000 salary a month, Shomari finds it impossible to save. At times his salary gets finished before he even receives it due to borrowing.

“I have to pay rent every month and other bills like electricity and water. I also send my mother some money in the village,” he says.

Because he remains with almost nothing after this, Shomari is always forced to borrow money to take him through the month. When he gets his salary, he ends up paying off debts and borrowing again.

As he puts it, he can not even afford taking care of himself.

Dorcas Isaac,25, understands Shomari’s situation. Having been there herself, Dorcas says it takes a lot of determination and discipline to be able to make any savings in such a situation.

Dorcas runs a tailoring shop, thanks to four years of saving. But she says it was not easy getting there. With less than Sh250,000 salary that she was earning from her front desk job at a hotel, saving was tough. Like Shomari, Dorcas too had bills to pay given that she was living alone.

Like any other young girl her age, Dorcas wanted to dress well, buy expensive handbags and nice shoes but her salary was never enough. She believes she managed to achieve her goal because she had a plan, something many young people don’t always have.

“I had to struggle to get out of the difficult life I was living. I was not comfortable with the job I was doing so I planned to save money so I could quit.”

She sacrificed everything so that she could save. “Because my salary was small, I used to save Sh50,000 only every month. I was living on a very tight budget.” She says many youth cannot save because they don’t have plans and therefore don’t make budgets.

“Everyone can save regardless of how much they earn. I too used to think I couldn’t save because my income was low. But here I am,” she says proudly.

Dorcas says if you can’t save because your income is low, you definitely won’t save if you got a lot of money. She says saving is a habit that has to be developed.

Nyalali the DSE expert concurs. He says we need to learn to save so we can be financially free.

“Financial freedom comes from saving. If we don’t save, there is no way we can be free financially, saving is a habit.”

Nyalali says you don’t have to wait to get a lot of money to start saving. Giving an example of buying shares on the stock market, Nyalali says people with low income can invest in shares with as little as Sh 2,000. This is a good way of cultivating a saving habit because the more you save, the more your money becomes.

Dorcas advises young people to have plans and work towards achieving them no matter how little their income is. She says they should not sit and wait for miracles to happen.

“You can save anywhere but it is safer and better in the bank as it is not easy to withdraw the money to spend once you deposit it,” she says.

Like Dorcas, Neema Stanford, 24, is among a few young people with a vision. Neema earns Sh100,000 from her house help job and saves Sh60,000 a month. Her goal is to get Sh1m to start charcoal business.

Neema has a child who lives with her mother in the village. She sends them Sh20,000 every month, puts aside Sh 20,000 for herself and saves the remaining 60,000 in the bank.

“My boss provides almost everything for me. I don’t pay for housing or food. I get everything just like any other family member.”

Neema has been saving for six months and plans to do so for one and a half years.

“It is not easy to save because there are many spending temptations. It takes a lot of dedication and focus to set and achieve your goals,” she says.

For Abdallah Mshana, an accountant, saving is a lot more easier now that he runs a side business. “I save money not only for the future but also for emergencies. I also save because I want to start my own company.”

The 25-year-old dreams of becoming a successful businessman one day. He saves half of his Sh700,000 salary every month for this.

“I currently operate a small money transfer business as I prepare for real business in future. My dream is to engage in big business like transportation and food supply.”

Abdallah believes he will have saved enough money in five years, after which he will start his business. The ambitious young man plans to borrow from the bank to add onto his savings for capital.

Nyalali says saving gives you financial freedom. “We become independent financially by saving and later investing. When a person is financially free, they don’t have financial problems and they can go to the bank and borrow money without any restrictions.”

He says when you are financially free, you can even retire early.