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Building a Nest Egg: saving money during a pandemic

In other countries, many have used the pandemic as an opportunity to save and prepare their finances for 2021. Taking the time to stop and ask, where am I now? What was working? What wasn’t working? Whether you are looking for tips for your personal finance or for your business, here are some ways you can start building a nest egg for the future.

By: Christine Salzmann

Tue, Dec. 1, 2020

Although the state of the economy beats expectations worldwide, the pandemic has certainly changed our shopping behaviors under the threat of possible unemployment, recession, and rising utilities costs.

In other countries, many have used the pandemic as an opportunity to save and prepare their finances for 2021. Taking the time to stop and ask, where am I now? What was working? What wasn’t working?

If you have answered those, then all that’s left to ask is “how do I build a nest egg, to save enough money to ensure I won’t have to worry about the future?”.

Whether you are looking for tips for your personal finance or for your business, here are some ways you can start building a nest egg for the future.

 

Build an Emergency Fund

Every person, and business, needs an emergency fund for unexpected situations and expenses such as pandemics and major accidents. The lack of available capital or savings is a chief obstacle when trying to survive difficult economic times or focusing on growth.

Having an emergency fund seems like a simple decision, but many struggle with where to begin. This is the foundation of your financial and saving plans.

To start, audit your expenses and spending habits over the last six months and what you may need for the next six. Decide, if any, can be removed or reduced. Depending on your needs, your emergency fund may only need to be enough to cover rent and food (aka. Survival) to including future investments.

When selecting how many months your emergency fund should keep you safe, think objectively about your job and income security and the current economic outlook. It is never a bad idea to plan ahead and prepare a few months of extra capital for any scenario.

The 20/30/50 rule is a great way to start a saving system, at least until you find a balance that fits your lifestyle. According to the rule, 50% of your income should go to your daily essentials, 20% to your wants or growth, and 30% to savings.

 

Use Digital Tools To Find Better Options

What used to be considered as conveniences before the pandemic have slowly become a necessity, both for protecting ourselves and saving our wallets. During the pandemic, several industries have developed their digital offerings to adapt to the changing landscape in order to survive, and these offerings are the next generation of ways to save.

With the closure of gyms earlier this year, gym franchises and trainers have grown online all over the world providing cheaper alternatives to traditional gyms.

Locally, major gyms published content on their social channels in a bid to keep clients happy and healthy during quarantine and gym shutdowns, and soon moved towards creating online apps and subscriptions of their services.

These online subscriptions are cheaper and more convenient than the traditional big gym subscription, needing only a small investment in workout equipment for the home.

There are still a lot of free workout content online as well, find them on YouTube or use hashtags on Instagram to start your search.

Several major supermarkets have either launched or further developed their e-grocery services and apps in 2020. Within the nine months since COVID-19 reached our shores, people who have added online shopping options in their routine have increased a minimum of 10% according to a summer Google report.

Save money by choosing bulk deals, weekly deals and more, with some e-grocery apps also providing free delivery and redeemable points. The apps provide an easier way to surf through shopping options and see how much you can save on each item.

On the other side, audit your other digital subscriptions such as online streaming services. If usage is lower than three times a week, then maybe a free alternative would be more appropriate and useful.

 

Spend Money Wisely

Optimize your spending habits by, as mentioned earlier, looking for bulk and weekly deals, as well as finding lower-priced alternatives.

When using bank cards, if you’re going to use it then use it wisely. Many banks have bonus point systems where you receive points according to your usage that can be redeemed as discounts or credit.

Identify high-cost but low-yield activities that aren’t vital to you, such as monthly shopping sprees and your favorite morning coffee from an expensive coffeeshop.

For some, coffee is an essential part of their day, and that is okay, simply look at your expenses objectively and select those that may not be essential. If this is difficult, pick one “want” a week that you are willing to spend on and limit your excess expenditure to that.

To develop your savings further, interest rates fluctuate and differ between banks so look for high-yield savings accounts with high interest rates, or certificates. Certificates will have better interest rates, but penalizes those that take out their money early.

In Egypt, public banks tend to provide the highest interest rates, both for saving accounts and certificates.

An option is to open a certificate in a public bank, notorious for long waiting lines, while keeping your savings and current accounts in a private bank with good mobile banking to better track your money.

 

Building Nest Eggs On FIRE

After building your emergency fund, it is time to identify your goals for growth and why you want to save.

For the last decade, a popular lifestyle movement has swept millennials across the world called FIRE (Financial Independence, Retire Early). The movement embraces the concept of saving most of your income (around 50-70%) in your 20s and 30s to enable you to retire between your 40-50s.

While this is not realistic for some, there are some lessons that can gleaned from the movement’s pillars.

While you may have gotten excited at the last 2 initials of FIRE, the movement’s followers actually lean more towards financial independence; using their nest egg, a large sum of saved money, to pursue their dream lives.

FIRE is often followed as a method to support a change in lifestyle, for those who have an alternate vision of how they want their lives to be but are tied down by obligations or unable to due to fulltime jobs. This can apply for those who want to retire early, want to save to start a business, or simply travel for a few years.

FIRE’s philosophy includes spending less and putting the excess in low-investment funds, stock options, investing in properties, and creating passive income streams that provide extra income with low effort.

Passive incomes, which include income from certificates and investments, provide a low-effort addition to any full or part-time work. Investing is encouraged, but so is proper planning and research before investing as FIRE investors understand that their money must last a long time.

Passive income streams can include rentals, online courses, bank certificates, high-yield saving accounts, and investing in a business that provides dividends.

 

Start Strong

Start your saving journey with quick wins, ones you can achieve today.

Many of us dream of major accomplishments, perfectly organized expense sheets, and high returns, but this type of thinking negatively affects how sustainably you can save money.

Don’t aspire for a complete saving plan that saves 60%+ of your income, aspire to select 3 non-essential expenditures today and cut those out or find cheaper alternatives, in both cases you have already saved a good amount.

If you have built a healthy emergency fund, deduced expenditures you’re willing to cut, and planned how you want to save money, saving money for your nest egg will become a sustainable habit. Some have built their nest eggs to millions that have helped them retire early, or enough to work remotely while mainly traveling.

Most importantly, protect your savings. The most important rule of all is the hardest to follow. Avoid your savings unless absolutely necessary or when it is to meet your saving goals.

 

You can find the print version in our December 2020 issue