In South Africa, the number of individuals who actively save money as part of a financial plan is alarmingly low. A recent survey indicates that three quarters of respondents save less than 15% of their monthly income, while 35% of individuals don’t save at all.
This has dire implications. Very simply, it means that a large percentage of the population has no retirement nest egg and will have to depend on charity or their children for survival. And, even for those who do save, there is the issue of longevity risk – living longer due to medical advances while running out of money.
Is Saving a Luxury or a Necessity?
Many people view saving as a kind of luxury – something aspirational but unaffordable. The truth, though, is that it’s absolutely possible to change your financial habits for the better. Here are 3 keys to making this work:- Start immediately.
- Be disciplined in your budgeting and planning.
- Be consistent and understand that even small changes yield compound results over time.
Start Where You Are With What You Have
In addition to consulting with an experienced and qualified financial advisor, there are several money saving strategies you can implement at home on a month-to-month basis. Once you have a plan, create a structure, and see tangible results, you’ll be surprised at just how much you can accomplish. There are 3 important elements to saving money on a day-to-day basis:- Minimise unnecessary expenditures and losses.
- Conserve or add to the money you already have.
- Actively invest in ways that get your money working for you.
Minimise Unnecessary Expenditure
By plugging leaks in your finances, you can immediately reduce the long-term cost of unnoticed losses over time:- Draw up a simple budget, accurately tracking your income and expenditure. You may be surprised at how some purchases (like fast food) can add up to more than you think.
- Try adopting the 70 / 20 / 10 system of budgeting. This simply means that you allocate 70% of your income to living expenses, 20% to debt repayment, 10% to savings. By having a structure, it’s easier to control impulse spending.
- Cut down on unnecessary expenses – but do it smartly. For example, don’t ditch a necessity like your car insurance. Rather, look at places where you’re paying excessive fees or have redundant contracts for services you’re no longer using.
- Consider facilitating your short-term insurance through a broker who will ensure the very best rates and cover for you.
- Buy less pricey brands, cook more often rather than buying ready meals, and do menu planning a few days in advance where possible.
- Consider joining or creating a carpool to conserve fuel and other vehicle-related expenses.
Conserve or Add to the Money You Have
Once the obvious financial leaks are dealt with, you can now look at maintaining your financial affairs a little more efficiently:- Consolidate debts and do away with unnecessary credit cards.
- Review your insurance policies to check if you’re overpaying on items where their value has depreciated over time.
- Look for grocery discounts or bulk offers and consider buying in bulk or stockpiling essential non-perishable items.
- Resist new offers of higher overdraft limits or credit card limits – these tempt impulse spending and will cost you more money if uitilised.
- If you have savings, don’t be tempted to dig into those funds for impulse purchases – no matter how attractive the offers might seem.
- Aim to build up an emergency fund to cater for unexpected setbacks or unforeseen emergencies. Ideally, you should aim to build up a buffer fund equal to at least three months’ income.
- Carefully examine your bank fees and other extraneous charges. Consider the interest you earn. If there are significantly better options, then you may want to change banks. Also, look at the rewards programs on offer from banks and other institutions, and take advantage of these where you can.
- Try implementing the 30-day rule: if you’re tempted to buy something non-essential, take 30 days to think about it. If you still want it after those 30 days, then buy it.
Get Your Money Working for You
One of the smartest changes you can make is to invest money in financial vehicles that will yield an attractive return. You could view this like a farmer planting seeds – the more seeds are planted, the greater the exponential returns down the line. Investing wisely can be an extremely fulfilling pursuit that is exciting and rewarding if you do it right. Of course, it makes sense to engage a skilled financial advisor to guide you here, so that you get the best possible return and choose the most suitable avenues for investment. So, how can you increase the amount money you’d like to invest on a consistent basis? Here are just a few ideas:- Look at creative ways of adding to your current income. What about a side hustle built on your talents or interests? Remember, people don’t only pay for products or services – they’re willing to pay for your knowledge or expertise, too. And it’s never been easier to formally market yourself online or simply through social media.
- Do a thorough clean out, sell those items you no longer use, and reap the benefit of uncluttering while turning old items into cash.
- Look at ways of earning commission by referring customers to businesses owned by friends, selling products on commission, or signing up for online affiliate referral programs.