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Banking expert highlights importance of balancing saving and spending

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by Kevon Browne

St. Kitts and Nevis (WINN) — The Eastern Caribbean Central Bank (ECCB) has emphasised the critical need to balance spending and saving for financial stability. In a recent discussion on ECCB Connects, Dawnette Constance, Manager at Republic Bank (E.C) Ltd Saint Vincent and the Grenadines Branch, offered practical strategies to navigate this financial balance.

Constance also underlined the importance of establishing an emergency fund to mitigate unforeseen financial challenges. Such proactive measures, she explained, provide a safety net and contribute to overall financial resilience. She stressed the significance of setting clear financial objectives and allocating a portion of income—ideally 20%—towards savings. This approach, she suggested, ensures a balance between meeting current spending needs and building towards future financial security.

Constance highlighted the importance of budgeting and emphasised its role as a tool for informed decision-making. A well-structured budget, she noted, provides clarity on financial priorities and enables individuals to align their spending and saving goals effectively.

“I must say balancing spending and saving is essential for anyone’s financial well-being. How can you create that balance? Create a budget. Having a budget is critical. It provides awareness of your financial situation. Then, set clear goals. Define your financial goals. It provides awareness of where you want to go, what are you spending on, what are you saving for. Then pay yourself first. Now, treat yourself as a non-negotiable expense.

“As soon as you receive your income, allocate a portion for savings, at least 20%. If you are not disciplined enough to remember to put that money in, set up an automated system so you really do not have to forget I need to save at least 20% of my income. Emergency fund. Characterise building an emergency fund. Aim to save at least three to six months’ worth of your living expenses. Now, having that safety net ensures that you are prepared for unexpected expenses.

“And always, especially ladies, we need to track our spending and avoid impulsive purchases. Now, there is a rule, a 50-30-20 rule. Allocate 50% of your income for your needs. That is, you pay your mortgage, groceries, and your bills. 30% for entertaining, going out, dining out. You work hard; you need to play a little harder, right? So ensure you budget 30% for that.
And as I said before, 20% should go towards your savings.”

Constance addressed the challenges individuals encounter in managing their finances, particularly in resisting impulsive spending and prioritising savings. She suggested practical techniques such as creating visual reminders, setting up monthly automatic transfers to savings accounts, and implementing a 24-hour waiting period before making non-essential purchases. These strategies aim to cultivate mindful spending habits and encourage disciplined saving practices.

“Resisting the urge to spend and characterising savings can be a challenge. It is challenging for us every single day. But let me just go through a couple of things that I think may help an individual. Create a visual reminder. Place visual reminders on saving goals that you have on a daily basis. You can create a vision board. Most people know what the vision board is like. You have a vision, this is what I would love to achieve in one year in two years. And you allocate savings towards that.

“Now, it’s important. We have our cell phones. Have your sticky notes. Even when you’re putting on your makeup in the morning, you have your sticky note there. I am saving towards that trip to Africa next year. So once you have that visual reminder, it will keep you a little, you know, stop being impulsive, basically. It keeps you at bay.

“Automatic savings. As I said before, it is critical that you save at least 20% of your income. I will not remember to transfer 20% to my savings account every month. I’m busy. We have busy lifestyles. Simply you go to your bank, or you go on your online banking, and you set up that automatic savings from your regular salary account to your designated savings account.”

The Bank Manager reiterated the essential nature of achieving a harmonious balance between spending and saving for sustained financial health.

“Use that 24-hour rule. When you want to make non-essential purchases, put it in your cart. Right? And in 24 hours, see if you really do need [it] or if you want that item. And it is very important as well to identify what triggers your spending. Understand what triggers your spending. Is it stress? Is it boredom? Is it social pressure? That’s important. In all that I said, remember, it is okay to enjoy life. But finding the balance between spending and saving is equally essential. It is essential [for] financial stability. It is essential for your financial health. Celebrate small victories along the way. And please be patient with yourself. Life is a journey.”

By adopting prudent financial habits and embracing delayed gratification, individuals can navigate today’s economic complexities and secure a more stable financial future.

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