The best month of the year, Ramadan is here. A time when Muslims fast from dawn to sunset, abstaining from bad habits and engaging in worship, especially during the night. This year Ramadan has fallen upon us during the month of April and presents a great opportunity to develop new saving habits.
A prime opportunity to form new saving habits
During Ramadan, Muslims are in a prime state to form new habits. Abstaining from food, drink and bad practices, trains us to be more self-disciplined and patient. It is also a time to reconnect to our spiritual purpose in life and align our activities accordingly.
Fasting comes with making a conscious decision to delay gratification for the future. You give up food, drink and other activities during the day in the hope of a reward in the next life. This is the same type of trade-off you make when you pursue a saving habit. You forgo the pleasure of spending your money immediately, in favour of using it later for more worthwhile pursuits. This could be anything from paying off debts, buying a home or funding a Hajj trip.
Where you can save
When looking to save, the first step is to review your existing expenditure. Classify your current spending into two buckets:
- Your needs. These are the bills that are necessary for your survival (rent, bills, groceries etc).
- Your wants. Any expenses on things that are not essential for your survival (entertainment, luxury items etc).
Your saving opportunities will likely come from the ‘wants’ bucket. Determining which ‘wants’ you can forgo whilst maintaining the quality of life you desire is up to you. Spending on your ‘wants’ is not a bad thing if it’s within your means. It’s just a matter of striking a balance between your wants now and in the future.
A popular budgeting tool that you could use is the ‘50/20/30 Budget Rule’. This is when you allocate your net income as follows: 50% to needs, 30% to wants and 20% to savings. Again, it’s all about finding the balance that works best for you and adopting an approach that is sustainable. If you are trying to cut down on too many of your wants, you may find yourself miserable and unable to persist with your habits in the long run.
A lot of the excess in our daily lifestyles is cut down during Ramadan. This makes it easier for you to identify opportunities to save. Impulsive eating and entertainment choices are cut down in favour of reading the Qur’an, praying salah at the mosque or other acts of worship. Here are some suggestions on ways you can save:
- Going out to eat less frequently and having more homemade meals instead. You can take this one step further by planning your meals in advance, making it less likely for you to make impulsive decisions. Meal planning also allows you to be healthy and is more sustainable as it results in less food waste.
- Cut down on under-utilised subscriptions. For example, subscriptions to a magazine that you barely read, or tv services that you rarely watch.
- Shop sustainably. Instead of buying shiny new item on the aisles, consider reusing existing items or creating personalised pieces. This could be for yourself or when purchasing Eid gifts for your loved ones. Making this extra effort can enhance the experience and help you build better bonds with your family and friends.
Save more to give more
Ramadan is typically the time of year when Muslims give the most and for good reason too. The Prophetic example was to donate more during Ramadan as shown by the following hadith.
“The Prophet (peace be upon him) was the most generous of people, and he used to become more generous in Ramadan” (Sahih al-Bukhari 3554).
In 2020, Muslims in the UK donated an astounding £150 million to charity during Ramadan, highlighting their generosity. Whilst this is commendable, there is also great virtue in donating more regularly.
“The Prophet (peace be upon him) was asked, ‘What deeds are loved most by Allah?’ He said, ‘The most regular constant deeds even though they may be few’” (Sahih al-Bukhari 6465).
With this in mind, consider dedicating some of your savings to charity throughout the year. Ramadan is a time where you reconnect with your faith, contemplate your purpose in life and think about the legacy you want to leave behind. The virtues of giving to charity have been illustrated many times in the Qur’an, including in the following verse.
“Indeed, those men and women who give in charity and lend to Allah a good loan will have it multiplied for them, and they will have an honourable reward” (Al-Hadid 57:18).
So this Ramadan, if it is within your means, make your intention to donate regularly. This could be as simple as setting up a regular direct debit or putting a reminder in your phone each month to find a new cause to support.
In summary, Ramadan offers a great opportunity to cleanse your finances and develop sustainable saving habits, helping you to achieve your goals, in this life and the next.
*As with any investment, capital is at risk, as the value of your investment can go down as well as up. Consult your financial advisor before implementing any plans as your needs may differ.