"I think the biggest mistake is not learning the habits of saving properly early, because saving is a habit. Pay attention to money habits and work to strengthen those that help your finances, and break those that hurt your finances."
- Warren Buffett, American business magnate, investor, and philanthropist.
Most people will earn well over a million Rand in their lifetime – more likely tens of millions – and yet very few South Africans become millionaires. Short of becoming the CEO of a company, winning the lottery, or inheriting a vast sum of money from a relative, most people make their fortune through saving money.
Let’s take a look at the healthy saving habits of financially smart people...
1. Draw Up a Plan
Understanding where your money goes every month is a critical aspect of becoming a savvy saver. Not only will it will help you identify where your money is being needlessly spent (perhaps on a subscription you no longer need, or all those restaurant dinners you could cut back on), but it will also help you create an achievable plan for saving; whether it’s for an overseas trip or retirement (or both!) If you can’t say with a degree of certainty and accuracy where your Rands are going, you could be losing out on saving hundreds, even thousands, every month.
2. Prioritize Saving
Most people pay their bills and use the remainder of their income to enjoy themselves: to go for dinner, to the movies, clothing shopping, away for the weekend, or to buy a new gadget for the home, etc. Whatever is left, if anything, goes into the savings account. Financially smart people, however, do it the other way around. Before they spend a single cent on entertainment or non-essentials, they deposit a portion of their income into their savings (this can be set up as a monthly debit order). Then, whatever is left over can be spent on going out and having fun.
3. Do Your Research and Shop Around
We all, at some time, need to spend a substantial amount of money on a big-ticket item, such as a washing machine, a TV, or a new laptop. But before you walk into the nearest electronics or appliance store and purchase the first one you clap eyes on, do your research. Shop around online to see what’s available and for what price. Decide on the features that are important to you so that you don’t waste money on products that are far more sophisticated than necessary. Also, research the brands that are known for quality and that carry decent warranties. In the long run, a smart choice works out to be more cost-effective.
4. Avoid Spending Triggers
If you haven’t allocated a portion of your budget towards an expense and yet find yourself seduced into an impulse buy, you are likely succumbing to a spending trigger. This can be a place, such as that Cotton On, Typo, or Exclusive Books store you simply can’t walk into without dropping a grand. It can also be a person: that friend, partner, or relative who loves shopping and whose enthusiasm is just a little too contagious. Try to avoid the places you have a soft spot for and instead of going to the mall with your walking talking spending trigger, invite them over for dinner or go for a walk together.
5. Be Patient and Wait it Out
Even the most disciplined and thriftiest of people get caught up in the excitement of buying something they really want. Suddenly, the budget goes out the window and you have to have that gorgeous (and ridiculously expensive) knife set from @Home! But, you’d be amazed at just how easy it can be let go. Just walk away and if you wake up the following morning still wanting that knife set, save up for it and then buy it. Most of the time, however, people let go and forget the second they walk away. Out of sight, out of mind.
These saving habits might not save you much at a time – perhaps R100 here, R300 there – but, being a habit, they make a considerable difference in the long term. This is why financially smart people are able to enjoy financial security, as well as the things they really want.