By Buhle Langa
Saving is often seen as one of those daunting tasks that most of us would rather delay, for varying reasons.
Stretching our rands
People often feel they have an insufficient cash supply to live on, and therefore have no money left to allocate to savings. Many people are out of work, others have reduced salaries, and those who are fortunate enough to still have a job are likely not receiving a salary increase. The economic climate means most of us are in a tight spot where we have to stretch our rands much further.
However, the Covid-19 pandemic has taught us that nothing in life is certain and that providing for rainy days should be high on our priority list.
Smarter money choices
As the economy starts to recover we should turn our attention to making smarter money choices for ourselves and our loved ones. One of the best places to start is knowing what exactly your current financial state is, assessing where it needs to be improved, and putting a plan in place to get you to there. Drawing up a budget is a very good place to start. Simply taking on someone else’s budget is never a good idea, as you need to have a budget that is suitable for your individual circumstances and lifestyle.
Once your budget has helped you establish what your income and expenses are, you will have a clearer picture whether you are keeping a healthy balance between your income, living expenses, debt and other costs. To keep abreast of your financial health, you will need to consistently check in with your budget and make sure that it remains relevant to your circumstances.
Tips to help you save
1. Have a savings plan and set a target.
It is recommended that one has an emergency fund that comprises three to six months of their salary. This will come in handy if you run into a financial crisis. People often fall into heavy debt obligations because they had no emergency savings and therefore feel they have no other choice but to get into debt when an unexpected event occurs. Planning for a nice holiday at the end of the year? Start making enquiries early about the costs involved such as the cost of accommodation and spending money to put a savings plan in place where you can put away money monthly so that you are not pressurised closer to the time of your holiday. If you can afford it, consider paying for your accommodation in advance as this can secure a discounted rate.
2. Pay yourself an annual bonus
With most companies having done away with year-end bonuses and 13th cheques, it is advisable to look into personally saving an amount monthly that will serve as a year-end bonus, to help pay for holiday expenses and additional expenses in January. Arranging with your payroll department to directly deduct this amount from your salary before it is paid into your bank account will help you beat the temptation to skip saving on some months.
3. Use a tax-free savings account to save
Supplement your retirement savings or put money away for a long-term goal like your children’s education. You can save up R36 000 a year and R500 000 during your life time. With a tax-free savings account you pay no tax on the interest or growth on your investment. That means no income tax, no capital gains tax and no dividends tax.
4. Take care with online purchases
Be sure that you are actually getting a good deal on your purchase, as online prices may be inflated compared to prices in the physical store. Try to stay away from making impulse purchases of items you don’t need. Getting tempted to buy things because they are branded as being on sale can be highly misleading and can lead to overspending and not sticking to your budget.
5. Count the cost of convenience
As convenient as ordering your favourite take-away meal and having it delivered to your door is, this usually comes with extra costs such as a delivery fee. These might seem like small amounts, but they add up when you are trying to get a handle on your finances.
Saving can prevent you from making big financial mistakes when you need cash to hand quickly. Examples are having to cash in your retirement savings and taking a high interest loan that will leave you in an even worse off position. Having sufficient savings set aside will help in alleviating financial pressure.
Buhle Langa is a certified financial planner at Alexander Forbes
PERSONAL FINANCE