200103 dirhams
The propensity to spend is inversely proportional to the necessity to save Image Credit: Gulf News

Dubai: I have a simple formula for savings: The propensity to spend is inversely proportional to the necessity to save. This approach has helped me most during these COVID-19 times, when money concerns remain paramount.

Like most, I too have a monthly budget, which I divide into different envelopes to ensure sub-budgets are met. These envelopes are marked ‘food & groceries’, ‘electricity’, ‘phone & internet’ and even ‘fun & frolic’. It was essential to meet the monthly budget overall. If there was any extra cost on a particular head, we would manage by diverting funds from another head. This mostly happened (and still happens) on the ‘electricity’ head during summer. But it is made up during winter.

Before COVID-19 struck, whatever we managed to save every month would be kept aside for any splurge expenses when our daughter comes for the holidays from her university — extra eating outs, cinema visits etc. However, now with salary cuts, we transfer these excess funds to draw less for the next month. Also, while working from home has resulted in lower fuel bills, it has also resulted in increased electricity and phone bills. So, we use the excess funds from the fuel costs to meet these utility bills.

Prudent use of credit cards also helps in a certain amount of savings. For example, I get loyalty points when I use my credit card. When these points add up to a certain level, I get vouchers that I can redeem at select stores. This also goes for shopping at a particular hypermarket where the loyalty points add up to a cash voucher after a certain point. In this way, over the last few months, I have accumulated vouchers of over Dh1,000.

The point to remember is not to go overboard while using the credit card. I follow a simple rule in this regard. Suppose I have a budget of Dh1,000 for ‘food & groceries’ for the month. So when I go to the hypermarket, say my bill comes up to Dh200. I will preserve these bills, and when I come back home, I will remove Dh200 from my ‘food & groceries’ envelope and keep it in the ‘credit card bills’ envelope. This way I can watch my spending.

Tip: Make a budget and stick to it. Keeping close track of all expenses. This will help you save those pennies at the end of the month. Sometimes, it may seem like a drop in the ocean. But as the late Mother Teresa once said, “The ocean would be less because of that missing drop.”