Last year, Statistics SA and Trading Economics released a report stipulating that the average South African household’s savings was down by -2.30 percent in the third quarter of 2016. These statistics prove that South Africans are battling to save money.
African Bank’s Group Executive- Insurance, Mellony Ramalho acknowledges that while setting a portion of one’s salary aside may seem impossible, it is important to take note of the fact that sacrificing a few luxuries now will yield fruitful benefits in the future.
“When it comes to planning for the future, there is no denying that many of us forget to think about the intricacies of our finances. Instead of thinking about saving our pennies, we think of luxurious holidays, festive weddings, or the glow of welcoming a new family member into the world, and while it is always exciting to dream big, we cannot forget about the fact that we need to ensure healthy and sustainable savings to achieve these dreams,” she says.
If you’re wondering about what it is that you need to know, take a look at the following five tips on what you need to know about saving for the future:
- Understand What You’re Working With
When it comes to your finances, it is important to take note of what you’re working with. Do you have one salary, are you combining two salaries from two people, what are the monthly responsibilities from which you can’t break away? If you’re looking to formulate a budget, take your net salary (after tax) and subtract your monthly debit orders and payments – these could be the monthly instalments on your credit card, personal loans or cell phone. Once you have subtracted these amounts, take a look at your responsibilities and dedicate an estimate of what you need to spend on each responsibility. Subtract the responsibilities, and your possible savings lie in what is left over. Keep in mind the fact that saving 10% of your net salary is an ideal starting point.
- Live Like You’re Earning Less
If you decide to set 10% of your earnings aside every month for the purpose of saving, it is important to remember that you will need to live like you’re earning 10% less to ensure that you don’t dip into your savings. While it might require some sacrifice, living a more frugal lifestyle now will ensure that you are able to have better sustainable financial freedom in the future.
- Practice the Art of Saying ‘No’
While a new suit, handbag or car may seem like a good idea now, it is important to remember that you may have to spend months or years paying it off, which can have an effect on your cumulative savings. To ensure that you are able to save money, you will need to ensure that you practice the art of saying ‘no’ when temptation calls your name.
- Stick to Your Goals
Do you dream of buying your own home, pursuing your studies or starting a family? Perhaps you need to save up for a deposit on a loan for a new car or would like to pay off your debt? If you’re looking for motivation to save your pennies, it is important to decide on a financial goal and stick to it. Not only will this ensure that you find the motivation to save your money, but it will also ensure that you stick to your goals to achieve a quicker result.
- Plan for Impulsive Spending
While saving is imperative to ensure a more stable financial future, it is also important to take note of the fact that impulsive spending does happen – whether it’s on a new pair of shoes, a holiday or a lavish dinner. Taking ownership of the fact that spontaneous spending does happen will ensure that you set aside a small sum of money, allowing you wiggle room in which to enjoy life as it happens.
At the end of the day getting one’s savings right will gain back financial independence. Financial independence is all about being in control of your money and not allowing money to manage you. “It is never too late to start and July provides an ideal springboard to start afresh with good financial savings habits,” concludes Ramalho.
Visit the African Bank website.