With a less-than-expected performance from the South African economy this year, we’d all like to know how to save money and get the most out of every cent of our salary. Wonga.co.za, as part of its Money Saving Tips guide, brings you five of the best practical ways to make the most your Rand.
Think before you spend
Credit cards should never be used for everyday expenses like petrol, food and clothes. They should be used so we do not need to carry cash or to gain reward points for purchases as part of a loyalty programme. Credit cards are best used for emergencies, like when your car breaks down before the next pay cheque and taking the rest of the month off from work is not an option!
Remember that you pay interest on credit so will spend more on that purchase than if you had bought it for cash. Avoid paying interest where possible by making cash purchases.
Get into the habit of using your credit card responsibly or curbing other spending until you have paid for purchases or an emergency. The next time you would like to make a purchase that is not an absolute necessity, hold off for three days – a personal ‘cooling off’ period before you make the purchase. You might find the same item elsewhere at a better price, come up with a cheaper alternative, or decide that you don’t need that item after all. Know the difference between items that you actually need and luxuries that you want.
Where possible, try to make a down-payment or deposit on items purchased on credit. You will not only be able to negotiate better terms, but spend far less on interest paid.
Spending most of your pay cheque on debt repayments without being able to save is recipe for financial disaster in the long-term. If you hope to be able to live relatively debt-free one day and have enough money to retire on, it is important to begin to save at least 10% of your income every month from the moment you begin to work.
Create financial goals and apply a plan to these goals that includes the amounts you would like to save and the time frame in which you would like to reach these goals.
Put away for an emergency
Most financial experts agree that you should have an emergency fund with enough money in it to support you financially for at least six months if you were to suddenly find yourself without an income. It’s time to worry if failure to get the next pay cheque would ruin you financially. Life is unpredictable and despite your best efforts can throw financial obstacles your way. An emergency fund gives you a little more peace of mind, not to mention wiggle-room.
The best way to building an emergency fund is to set aside money every month, separate from your savings, and place this into a savings account that allows you easy access to your money in time of crisis.
Never be without a budget
A budget should always be at the centre of financial responsibility. A number of templates exist online that can help you to set up a budget. Once done, it’s all about disciplining yourself to stick as closely to that budget as possible.
Begin by listing your current expenses and whether each expense is a necessity or a luxury (you can use recent credit card bills and bank statements to help you). Then, note down your monthly income. Now compare your income and expenses. If your expenses are higher, you will need to cut back on these expenses until your income is higher than your expenditures.
As the saying goes – knowledge is power – so take advantage of all the good advice you can find online about budgeting, savings, retirement planning, discover your net worth and learn to balance your bank statement.
Take stock of your financial situation
Your situation and circumstances will change many times in your life. It is important to adjust your financial plan to take these changes into account. Job loss, divorce, changes in health, an additional dependent, will all impact your financial well being.
It is a good idea to get advice from a financial adviser to help you make the best decisions at important financial turning points in your life. Deal only with a licensed financial advisor so that way you have some protection if anything goes wrong. Take time to find the best person for your needs. An advisor should always be qualified and experienced in giving the advice you need in a clear and concise way.
Educating yourself about your finances will mean that you are more in control of your money and can go about confidently achieving your financial goals.