Waseem sits at his kitchen table, staring at his latest credit card statement. His stomach churns.
After months of carrying a balance on the card, he finds himself in thousands of dollars of debt with no apparent way out.
But it wasn't always this way. Waseem used to be financially stable. Or at least he thought he was.
Waseem had a simple method for managing his money: he intuitively cut back when he felt he was spending too much. He indulged a little when he felt like he had enough to spare. He called it his "budget-by-gut" method. And it worked fine…until it didn’t.
Waseem had considered saving up an emergency fund, but he put it off whenever he thought of it. Given how things had gone in the past, he didn't believe that he needed one. Besides, he once heard an Imam mention that the Prophet (PBUH) “did not save anything for tomorrow.” Maybe saving wasn’t a practice for devout Muslims?
Waseem's financial problems began to snowball eight months ago when he received his credit card statement. His family's previous vacation had cost more than he had planned for, and his other monthly expenses left him short on funds to cover the balance. Lacking an emergency fund, Waseem found himself unable to bridge the gap.
Now, for the first time in his life, Waseem faced the weight of credit card debt and accruing interest charges.
The following month, he tried to be more mindful of his spending. He packed his lunch for work. He ignored online Black Friday ads. He drove straight past Starbucks on his way home.
Waseem's frugality made a small dent in his credit card balance. He was paying more than the minimum balance, and his credit score was fine. But most of the debt on the card carried forward, and the interest continued to accrue.
And then an unexpected car repair made things worse. Waseem continued to fall deeper into the red.
Now, eight months later, Waseem is consumed by guilt and anxiety. He obsesses over his bills and then avoids them entirely. He thinks about getting a second job to help pay them off, but he's not sure how he'd explain that to his family. He feels drained. He sees no end in sight.
How could a single month of overspending spiral into this?
Waseem’s situation results from entangled psychological, behavioral, and religious factors. We’ll need to tease apart each of them to understand how he got here.
On the one hand, he had a misguided understanding of the Prophetic approach to saving money. And on the other hand, he was playing the dangerous game of marginless personal finance.
What does the sunnah actually teach us about saving?
Waseem did not build a financial buffer for himself because, in part, he had heard that the Prophet (PBUH) "did not save anything for tomorrow."
There are hadith to that effect. They highlight that the Prophet (PBUH) lived a simple life, worked for his sustenance every single day, and trusted that God would give him, through his work, enough for himself and his family. These hadiths are important reminders that we too should live simply, work hard, and trust that God will help us when we try to provide for ourselves and our families.
But that’s not the whole story. Other hadiths show that the Prophet (PBUH) did save. One narration says that the Prophet (PBUH) “would store a year’s worth of food for his family.”
How do we square the idea that the Prophet (PBUH) would not save food for the next day, and yet he would save food for an entire year?
At times in his life, the Prophet (PBUH) went for long periods with no savings. At the beginning of the Prophetic mission, financial difficulties were widespread among the believers, and the Prophet (PBUH) lived a life no different from that of his companions. Even after the migration to Madinah, months would go by without a fire lit in the Prophet’s (PBUH) home – meaning they had no cooked food and lived only on dates and water.
Later, the situation improved, but the Prophet (PBUH) continued to help his community by donating all his savings to charity. But that isn’t recommended for everyone.
Scholars note that the Prophet’s (PBUH) total abstinence from savings was a practice exclusive to him. In his book, al-Khasais al-Kubra (The Exclusive Characteristics of the Prophet), the 15th-century scholar Imam al-Suyuti lists “not saving anything for the next day” as a special characteristic of the Prophet (PBUH). In other words, consistently saving nothing for tomorrow was not something meant for everyone else to follow.
The general guidance for all believers about savings and charity is found in the Qur’an. In Surah al-Isra’ (chapter 17), we are instructed to be charitable and not to waste our wealth (verse 26). We are told not to be tight-fisted like a person whose hands are chained to his neck, such that he never reaches into his pockets to give. And we are warned against being too open-handed such that we leave nothing for ourselves or our families and wind up needing charity ourselves (verse 29).
The Prophet (PBUH) exemplified that command. He may not have saved anything for himself, but he did save for his family. Waseem would’ve been wise to do the same.
But the reality for Waseem, like most of us, is that the real reason he didn’t save wasn’t religious. Religion was just an easy cover for what was really going on. That’s what we’ll look at next and ask if we’re in the same boat.
The psychology of saving
The sobering reality is that Waseem was never as financially secure as he believed.
He had a good job and wasn't an extravagant spender, but Waseem was playing a risky game beneath the surface. When faced with an unexpected expense, he had no savings to pay for it in full.
There are a lot of Waseems out there.
These are alarming statistics.
Imagine driving down a winding, unguarded mountain highway and watching every other car skirt the cliff's edge, nearly veering off the road. That's every other American consumer living on the financial edge.
And a credit card is a phantom guardrail. The fleeting sense of security it provides ends abruptly once the bill is due, casting most of its dependents into financial freefall.
And yet, many drivers make their way down the road just fine. They're the drivers who maintain a margin of safety and the savers who prioritize financial stability and security.
What about them makes them different from non-savers? Do savers have more money to save than non-savers? That's partially true - on average, people with higher incomes are more likely to save. But that's not the whole picture.
Studies indicate that thoughts, more than income, shape saving habits.
Savers are more likely to empathize with future versions of themselves. They have, what psychologists call, a “future orientation” and are more adept at delaying gratification. Non-savers, on the other hand, demonstrate a “present bias” and assign more weight to immediate rewards. Their optimism causes them to ignore the possibility that unexpected events will happen to them.
According to Morgan Housel, author of The Psychology of Money, there's a simple taxonomy for classifying individuals based on their approach to saving money. There are those who:
- Think they don't need to save (we’ll call them “overconfident non-savers”)
- Think they can't save (we’ll call them “overwhelmed non-savers”)
The risk of not saving
Waseem was an overconfident non-saver initially.
He didn’t think that he needed to save.
In place of an emergency fund, Waseem found financial assurance in his reliable salary. Instead of saving for a rainy day, he relied on his “budget-by-gut” method to manage unexpected expenses with leftover cash at the end of the month. It had never failed before.
But what Waseem did not appreciate was how neglecting to save amplified the financial risk he was choosing to carry.
Risk is a notoriously difficult variable to pin down in personal finance. The reason, psychologists point out, is our tendency to let our emotions and past experiences affect our judgment. In other words, we don't compute risk very well because … we're human.
And because risk is a slippery notion, we readily turn away exchanging something real and certain (today's vacation) for something imagined and uncertain (tomorrow's car repair).
Blind to risk, overconfident non-savers like Waseem drive close to the edge with little to no margin. They do not appreciate the relationship their lack of savings has on their exposure to risk.
That relationship may not be obvious to many, so here's an easy shorthand to remember the link:
↓ Savings = ↑ Risk
↑ Savings = ↓ Risk
We’ll return to this shorthand a little later.
Saving with purpose
Waseem treated saving money like a chore he could perpetually delay.
That’s understandable. Most chores aren’t fun.
And yet we do chores anyway.
We know that if we don’t, we’ll eventually face the consequences of our negligence. We don't do laundry because we get a kick out of it. We do it because if we don't, we'll end up wearing the same shirt for a week.
As a chore, neglecting to save has consequences. They’re just not as apparent as ignoring the laundry.
That’s why saving money, specifically building an emergency fund, demands more intentionality than other chores. The repercussions of failing to save frequently materialize too late, often leading to something more severe than just a stained shirt.
Saving well is systematized and automated. It shouldn’t require our regular tinkering to make it work.
Manually saving month-over-month will fail, not because we don't want to save, but because we've left this essential chore to the vagaries of our mood. One month we’ll feel motivated to save, and maybe not the next. One month we'll remember, and the following month we won't.
Automated saving decreases our risk exposure without us regularly intervening. It builds in margin and safety every month, whether we feel like it or not.
3 practical steps for building an emergency fund
While Waseem was still an overconfident non-saver, he had the opportunity to prevent his current predicament entirely. Building an emergency fund would’ve decreased his risk exposure and moved him away from the financial edge.
But for Waseem, and many non-savers, saving is nebulous. It sounds like a reasonable idea in theory, but saving in practice is hard (see above).
Here are the 3 practical steps any other overconfident non-savers could take to begin saving:
- Open a separate account. Managing spending and savings from one account is convoluted - there's no way to determine how much you've saved without doing some math and forecasting. A separate account solves that issue entirely. At a glance, you’ll know the status of your emergency fund. Because standard savings accounts include interest, a no-fee checking account at your bank might be the best option to build your emergency fund.
- Determine a savings rate: Most financial coaches recommend saving 3-6 months of expenses in an emergency fund. For most non-savers, that will take time. So, set aside as large of a lump sum as you can (say it's $1,000), and then decide what percentage of your income you'll set aside for your rainy day fund every paycheck. What percentage? That depends. Start with 5% and see if you can inch it up month-by-month. But it doesn't matter how low the rate is - 1% sent to savings per month is better than nothing.
- Automate: Making the decision to save every month might work the first few times you do it, but eventually, it's likely to wear away. You might lose motivation, lose sight of your goal, or simply forget. That's why automation is essential. Set up an automatic transfer from your checking account to your emergency fund every month. Build a rainy day fund on autopilot. Set it and forget it.
An extra step for overwhelmed non-savers
For Waseem, these steps seem of little use now. His predicament today feels like it demands a different approach. He’s now an overwhelmed non-saver: Waseem doesn’t think he can save because he’s in credit card debt with no plan to get out. How could he start saving now?
Let’s recall the shorthand we covered earlier:
↓ Savings = ↑ Risk
↑ Savings = ↓ Risk
Waseem is still dealing with a lot of risk. Because he’s added a rolling debt to his lack of savings, he’s more exposed now than ever.
And while the notion of a fully funded emergency fund feels unattainable now, saving even a little cash would help.
When he was hit with an unexpected car expense a few months ago, Waseem used his credit card to pay for it as he always had. That just pulled him deeper into debt.
It’s only a matter of time before Waseem faces another unexpected expense in the coming months. When he does, how will he pay for it? An emergency fund, however small, would decrease risk by degrees because it would allow him to use cash reserves instead of more debt.
So, the three steps listed above are just as applicable to Waseem as they are to anyone else. There is, however, one extra step he must take before he can proceed.
Cut up the credit card.
That may sound extreme, but for Waseem, it’s necessary. He’s fallen off the financial edge, and his credit card is a false guardrail. When he relies on it, it provides short-term relief that quickly vanishes once he receives the monthly statement.
Waseem’s credit card pulls the rug, and his fall prolongs. He must stop using it until he’s at least on solid ground.
- Cut up the credit card. Use cash or a debit card for all spending moving forward.
- Deal with the debt. Now that the credit card debt is static, Waseem must pay it off quickly. He’ll need to decide on a monthly amount he’ll send to his credit card and then automate payments. Month by month, he’ll see his debt dwindle until it’s gone entirely. He can use an online calculator to see how long it’ll take him to pay it off.
And once that’s done, Waseem should follow the steps mentioned above:
- Open a Separate Savings Account.
- Determine a Saving Rate
Waseem was unwittingly driving close to the financial edge, leading him to eventually veer into a consumer debt freefall.
And Waseem isn’t alone. Statistically, many readers of this article are likely facing similar situations. The financial burden can be overwhelming and exhausting for Waseem and others in his position.
But there is both hope and a simple plan to help you get back to stability: cut up the credit card, attack the debt, open a separate savings account, determine a saving rate, and automate.
As Waseem takes each step, he will not immediately feel rescued. The steps are a rope he can grab to inch toward stability steadily; they will not airlift him there immediately.
But, with time and intentionality, he will find himself on solid ground.
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