Johannesburg - In 2014 I travelled to Omaha,
Nebraska to attend the Berkshire Hathaway annual shareholders meeting.
Thirty-nine thousand shareholders in Warren Buffett’s famous holding company
travelled from around the world for a six-hour question and answer session with
the 84-year-old Buffett and his 91-year-old business partner Charlie Munger.
Buffett has referred to the meeting as
“Woodstock for Capitalists”. If you were attentive and took in every word, you
would have heard all about the company in immense detail, with matters such as
preferred annual returns, bolt-on acquisitions, return on investments etc.
Being slightly more of a layman, I preferred
to listen out for the high-level wisdom that Buffett dispenses. He has a way of
simplifying life and business down to common sense - Buffett famously only
invests in businesses that he himself can understand.
I feel the same way. It is crucial to
un-cloud complicated money matters and to look at things on a fundamental
level. Most of us spend the majority of our lives working hard for our money,
but how much time do we spend thinking philosophically and simply about the
everyday ways in which we spend and hopefully invest it?
These are some of my basic money tips:
1. Pay your DStv account upfront for the year
This is my number one tip to anyone who asks
me how to start saving money. It’s the best, guaranteed saving I’ve seen on a
R9 000 upfront spend. If you’re saving money into any sort of risk-free
investment, you should seriously consider holding back the first R9k and paying
it over to our friends at MultiChoice at the beginning of each April. I’d look
at this as if it were an investment.
Here’s why: as they do each year, DStv
increased the cost of DStv premium (including access fee) from R740 per month
to R780 per month from April 1. That’s an increase of R480 per year. However,
if your account is paid upfront for the year before April 1, Multichoice will
charge you last year’s price. What’s more, they will also only charge you for
11 months!
Let’s calculate the saving/return they’re
offering you: (R480 + R740)/R9 360 = 13%. Obviously, if you kept the money in
an interest-bearing account and let the balance diminish throughout the year
you would earn interest, which is an opportunity cost to you.
But this is minimal compared to the 13% on
offer. If you pay the R9k on your credit card, you could even roll the physical
payment for another two months (at which point you would already have paid
three months of subscriptions anyway), but we’ll get to that later.
2. Switching funds triggers CGT
This might not sound like something
particularly important until it happens to you – and I’ve seen people hit by it
twice this year already. When you move money between funds within an asset
manager or a bank, capital gains tax is triggered. For example, you invested
R500k in an equity fund 5 years ago. Your money is now worth R750k.
You decide that the market is a bit too
volatile for your liking and you switch the money into a balanced or a stable
fund. A capital gain of R250k is triggered and you will be required to pay tax
of R33 825 [R250k x 41% (tax rate) x 33% (CGT inclusion rate)] if you are in
the top tax bracket.
Of course, you will have to pay the CGT at
some point in your life when you cash out the investment anyway. It just brings
the cash flow forward. If you’re not expecting it, this can be a big hit for
you. Make sure you double check the tax implications with the financial
institution before doing something like this.
3. Tax-free savings accounts are a must
Tax-free savings accounts are a new savings
product introduced in South Africa this year through government legislation.
They allow you to save a maximum of R30 000 per year (and R500 000 in your
lifetime) into a specially designated fund/account.
Often, these are the same funds that you may
already be investing in (if so, you might as well change over by opening a
tax-free version of that account). For anyone looking to save long term, these
accounts are an absolute must-have because no tax or withholding tax is payable
on your capital gain or on your dividends/interest earned.
In my opinion, it is ideal for younger
investors to invest this R30 000 in high risk/high yielding funds as opposed to
stable funds/fixed deposits. Firstly, the larger the gain you can potentially
make, the higher your potential tax saving will be when you eventually cash
out. This is different to a pension/retirement annuity where your main tax
saving is on your upfront contribution.
Secondly, we all already receive an interest
exemption annually, which should be exhausted on your more stable, interest
bearing investments. The tax-free-savings account could then be used for
dividend-yielding investments.
What is also important to note is that once
you cash out your investment, your lifetime allowance into the savings account
is depleted by the base value of the amount you cashed out. So it makes sense
to let this money grow for as long as possible.
Lastly, if you have a family, I would
consider investing the 30k per year for every family member on the first day of
the year (giving your money as much time to compound as possible). Keep in mind
that you are only allowed to donate a total of 100k per year to your
children/spouse tax-free. So if you have more than three dependants, don’t forget
about the donations tax implications.
4. Don’t keep idle money in your bank account
By far the most profitable type of deposit
for a bank is what they term “idle deposits”. An idle deposit is money that an
account holder leaves in their current account earning very little or no
interest. The majority of that money is lent out as short-term loans and the
bank makes a fortune on the difference between the interest charged and the
interest it pays (or doesn’t pay). My bank account, for instance, earns the
tidy sum of 0.2% interest on balances above R100k.
Many of us leave money lying around in
current accounts earning nothing, while spending our time complaining about the
13c per litre increase in the petrol price. My suggestion would be to:
• Move the money in and out of your bond for
short-term purposes (if you have a flexi-bond);
• Move the money into a money market account or seven-day call fixed deposit; • Use your credit card effectively (to be discussed later in the article); and • Apply for a Facility or a “One Account” (FNB).
• Move the money into a money market account or seven-day call fixed deposit; • Use your credit card effectively (to be discussed later in the article); and • Apply for a Facility or a “One Account” (FNB).
The latter is a truly ingenious product
offered by FNB. It turns your home loan into an overdraft on your current
account. As an example, let’s say your home loan balance is R1m and your salary
is R30k per month. Your salary is paid into your home loan, reducing the
balance to R970k.
As you spend your salary throughout the month
and your debit orders come off the account etc, the balance on the home loan
increases again slowly back up to the R1m mark. In effect, you are saving say
8% to 10% interest on money that would have earned nothing until spent.
5. Saving into your bond
In November 2014, I wrote an article for
Moneyweb about residential
property investments. I received a lot of critical response for
suggesting that saving into one’s bond/loan is a bad idea. Obviously, a lot
depends on your personal financial circumstances. However, I still propose that
paying off your home loan as quickly as possible does not always make financial
sense. My reasons for this are twofold:
1. Interest rates have been extremely low for
the last few years, to the point where it has been fairly easy to find an
investment that will earn you a better return than the interest saving you can
make by repaying capital on your loan. Perhaps this will not be as true going
forward if interest rates increase sharply and the market pulls back somewhat.
Paying off other debt can also be a better
investment than your bond. I recently met someone who was saving monthly into
their bond even though they had a car loan and credit card debt – always
remember to pay off your more expensive debt first. If you are more of a
passive investor or you are very risk-averse, then saving into your bond is a better
option than a money market account or a fixed deposit.
2. Interest paid on a loan for an investment
property is fully tax deductible. If you are in the top tax bracket paying 41%
on each rand of marginal income you earn, you will be entitled to a tax
deduction of an effective 41% on each rand of interest paid. If your loan
interest rate is 9.25% (prime), your effective cost of interest is actually
only 5.45% (9.25*0.59).
Lastly, if you’re going to save into your
bond, make sure that the bank does not capitalise that payment and that you
have a flexi facility so that you can access it later on as a form of cheap
finance for another property, a new car etc.
6. Understand how to use a credit card
A credit card can be your best friend if you
know how to use it correctly. Of course, banks earn crazy amounts of interest
from credit card users who don’t pay their balances on time each month. Here
are some basic things many people don’t know about credit cards:
• The 55 days interest-free credit doesn’t
necessarily start from the day you swipe your card. It starts the day after
your statement date. Each day after that, you have 1 less day to pay back the
money all the way down to 25 days. For example, if your statement date is the
13th of the month, you will have 55 interest free days if you swipe on the 14th
and 54 days if you swipe on the 15th etc. If you swipe the day before your next
statement date – on the 12th - you will only have 25 days to pay.
• If you do pay the “minimum repayment” (and
not the full payment), you are charged interest. If you don’t pay the “minimum
repayment” on the card, you are charged backdated interest from the day that
you swiped the card (up to 55 days back)!
• The interest rate charged on your card is
generally very high. Don’t fool yourself into thinking that this is a good way
to borrow money.
If you manage your repayments properly (most
banks allow for an automatic debit pull for the minimum amount due at 55 days),
you can effectively roll your spend over for payment up to two months later.
You should take advantage of this by investing the money that you would have
spent in cash into short-erm investments to earn interest on the bank’s money.
7. Channel your spend to your credit card
I could write for a long time about credit
card loyalty programmes – they’re somewhat of a passion of mine. I even tried
to buy my car on my credit card. Programmes like eBucks (FNB), Greenbacks
(Nedbank) etc can be lucrative ways to benefit from your existing monthly
spend.
Depending on your rewards level, banks pay
anything between 1% to 6% on everyday spend and I’ve seen up to 50% on fuel
spend. There are certainly many hoops to jump through to get to the top loyalty
earning bracket. However, at the least you should expect to earn 1% back on
your credit card spend.
If you can channel an annual spend of for
example R100k per year (R8.3k p/m) to your card, you could earn an extra R1 000
per year.
8. Medical savings account versus hospital plan
I’m going to write very generally here
because I haven’t researched every medical aid scheme in South Africa. A
medical savings account is a way for a medical aid to force you to save for
day-to-day medical costs that the medical aid itself does not provide for in
benefits.
In many cases, there is no difference in
benefits between a hospital plan and a basic medical savings plan. The
additional amount that you pay for the savings plan goes directly into your
“savings account” until used.
For example, if a hospital plan costs R1 000
per month and a medical savings plan costs R1 500, the additional R500 x 12
months will be your savings for the year. This R6 000 is depleted as you use it
throughout the year. If you don’t use it this year, it carries over to next
year. If you leave the medical aid, they will pay the savings back to you. It’s
your money. The medical aid just holds it for you – and pays you very little
interest on the balance.
Obviously, if you happen to use up most of
your savings in the first month or two of the year the medical aid is, in
effect, giving you interest-free credit on the savings you’ve used but for
which you have not yet paid (your break-even point here is 6 months).
But I suspect that this would not apply to the
majority of members – otherwise the whole idea of medical aid would probably
not work in the first place. If your savings are carried over for a second or
third year, then there is a compounded lost opportunity cost to not investing
the savings money yourself.
So if you have the self-control to save for
day-to-day medical expenses and you are a fairly healthy person, a hospital
plan could perhaps be better suited to you. NB: there are many schemes that do
offer additional benefits on their savings option so you need to investigate
this fully before making a decision.
Lastly, it’s important to note that if your
company “contributes” a portion of your medical aid cost, it is often just a
reallocation of your cost to company. Many people opt for more expensive
medical schemes because they think their employer is paying more towards them.
In reality, the employer contribution is just
an allocation and if you opted for the less expensive scheme, your take-home
salary could be higher.
9. Tax benefits of pension funds and RAs
There’s a lot about pension funds that bugs
me. They are one of the most fee intensive ways to invest your money. Most
functions are generally outsourced to providers - from the admin to the
investment decisions to the investments themselves.
In effect, this makes for a layered system in
which everyone involved takes a cut in the form of a percentage of funds
invested or a percentage of the return generated. Fees are charged all along
the chain. On top of this, many pension funds are also mismanaged due to the
disconnect between management and decisions made.
But you cannot avoid the massive benefits
pension funds and retirement annuities (RAs) offer you from a tax perspective.
Undoubtedly the biggest benefit is the full upfront tax deduction. This means
that if you are paying tax at a 41% marginal rate, you will receive 41% of
everything you contribute to your pension/RA in upfront cash from the South
African Revenue Service (Sars)!
• If your pension is deducted monthly from
your salary, the tax saving is embedded in your net salary received – the
benefit to this is that your money has longer to compound in the fund, earning
you tax-free gains. You also get an immediate tax benefit set off against your
PAYE each month.
• If you contribute to the fund directly,
you’ll receive the money back in the form of a refund when you submit your
final tax return – the benefit here is that you can invest the money for the
year yourself and make your contribution just before the end of the tax year.
I’ll let you decide which is preferable. But
in effect, Sars is paying you to save money! Depending on how much your company
is paying over for you already, you can also look at topping up your
contribution to take advantage of the full deduction allowed (which is capped).
When you cash out (after the age of 55 aside
for a few exceptions), you can only withdraw one-third of your funds as a lump
sum and there is a partial tax exemption on this withdrawal. The remaining
two-thirds must be paid as an annuity (fully taxed). So in reality, a
portion of the upfront tax saving is recouped when you cash out, but there is
still a major cash flow timing difference to take advantage of because you can
invest the upfront tax saving elsewhere.
* This guest post is by Dean Gerber CA (SA),
who works at VAT IT and is a residential property investor. He can be
contacted on: gerberarticles@gmail.com.
Disclaimer: All letters and
comments published in MyFin24 have been independently written by members of the
Fin24 community. The views are therefore their own and do not necessarily
represent those of Fin24.
at 05:59
SAVINGS
TIPS
Below are some practical
tips on what you can do to start saving.
MAKE SAVINGS A PRIORITY
Your goal should be to save at least 10% of your
pre-tax earnings. Consider paying yourself first by starting a regular savings
plan that could form the backbone of a fund from which you will be able to draw
money to cover the necessities of life.
Whether you are saving for a major purchase or for
your retirement, you will never reach your goals unless you make savings a
priority. Little changes can add up to big savings on expenses. Those savings
can be put to good use for achieving your long term savings goals.
Are you a spender or a saver? Be honest with
yourself and select investments that will provide you with the discipline you
may need.
MAKE SAVINGS FUN
Turn savings into a game. Instead of force feeding
budgeting tips to yourself, look at this as an adventure. Try to top your own
savings each month or compete with a friend. Make savings a family affair –
have a fun programme of savings for everyone to enjoy.
Consider having a kitchen jar to save money for a
family holiday. You might want to give yourself pocket money allowance. The key
is that your spending should not exceed your allowance. After the money is
gone, its gone.
GETTING STARTED WITH A
SAVINGS PLAN
Don’t neglect tomorrow due to extravagance today.
If you need to start savings, start TODAY! Procrastination is enemy no 1.
Invest when the market is low, its sale time! Its
important to invest for the long haul and be prepared to ride out the highs and
lows.
It may help to draw up your bucket list and
separate it into short, medium and long term goals. This will play a large part
in selecting appropriate savings vehicles to achieve these goals.
CREATE A BUDGET
A great way to help save money is to create a
budget, and then stick to it. Even by just tracking where the money is going,
you will be more aware of your spending habits and eliminate unnecessary
spending. One of the best ways to save money is to never see it. Set up direct
debits and designate that some of your money goes directly into a savings
account.
Keep a money jar that you can throw all your change
into each night is a great way to save money. Plus, if you keep a note of how
much you spend, you will be able to calculate how much your day-to-day living
is costing you.
Avoid temptations such as special offers popping
into your mailbox daily, unless it’s something you have been looking out for
specifically.
SAVING FOR RETIREMENT
Retirement should not be regarded as a point in
time but rather as a period over which transition is made from living off
earnings to living off savings. When you cannot work in old age, your money
will be working for you.
You must start early enough, and you must save
enough. If you leave off starting to save for retirement from 30 years before
to 10 years before, you will have to put away 10 times as much each month.
Take retirement savings seriously and do more than
your parents and grandparents did.
SAVING FOR EDUCATION
Savings funds can be set up long before it is known
exactly where they will be needed. Save a bonus in an RA and each year after
that top it up by the amount saved in tax from the previous year plus the amount
by which the bonus for the current year exceeds the bonus from the previous
year. Double up on money saved by your children to encourage them to develop a
savings habit.
SAVE ON BANKING &
INSURANCE
·
Eliminate unnecessary fees.
·
Avoid ATMs outside your
network.
·
Check with you bank to make
sure you have the best type of account for your needs.
·
Sign up for automatic bill
paying to avoid late fees and tarnished credit.
·
Move it out of sight.
Getting money immediately withdrawn from you paycheck and put into savings is a
great way to create a nice little nest egg.
Keeping on top of your
mortgage situation can help you save big.
Always keep up to date on
your car insurance – remember each year the value of your car will decrease so
remember to amend the retail/ market value on your insurance to ensure you are
paying the right premiums for your car insurance.
You don’t need to insure
your house with your lender. Rather, shop around to find the best home building
insurance deal you can get. Plus, update your household inventory for insurance
purposes. Check on replacement costs and grade your household goods correctly
to ensure you are not over insuring your household items.
Your health will directly
impact the cost of life insurance and in some cases can reduce your health
insurance and unforeseen or budgeted for bills if you get ill.
REDUCE HOUSEHOLD EXPENSES
·
Stop buying processed food
at the supermarket and make food from scratch. Go fresh food – pre-packaged
food generally costs more and are not good for you.
·
Buy only what you need in
perishables – how many of us root through our veggie draw to find mouldy
lettuce?
·
Buy in bulk – single packs
often cost nearly as much as multi-packs.
·
Buy family pack items these
often work out cheaper than smaller packages and can be divided and frozen for
later use.
·
Don’t let your eyes be
bigger than your tummy. Buy only what you need for the week and avoid stocking
up with food which could spoil quickly. If you run out of food mid-week its no
big deal to make a second trip to the supermarket.
·
Cook at home and bring your
leftovers for lunch. Get into the habit of rustling up your own food and you
can easily pocket half of that cash, using the other half to bulk buy your
groceries at the supermarket.
·
Plan your meals and take a
list when shopping.
·
Downgrade your brand
purchases. Going for the cheapest is a bit over the top but how about dropping
a brand level on everything you can and the overall price drops by roughly 30%.
Often you are only paying for the branded packaging anyway.
·
Give alternative gifts and
remember, “it’s the thought that counts” – put that to the test by offering
alternative gifts. Home make your presents, offer a service, - they’ll love
your thoughtfulness and you get to pocket the cash you would have otherwise
spent.
·
Compare prices – shop
around for the best prices.
·
Familiarize yourself with
seasonal sales. But, forbid yourself from buying things simply because they on
sale. Regardless of bargain prices an extra expense is just that – yet another
drain on your resources.
·
Be a smart shopper by
buying quality when it counts.
·
Delay gratification –
giving yourself more time to think about a purchase means you’ll make a more
informed, less impetuous decision.
·
Always shop with a list –
it keeps you focused on what you really need.
·
Discount shopping - some
products are cheaper at certain times of the year. Follow the shops' sales
cycles and use this to your advantage and build a shopping calendar.
·
Electricity is a problem in
South Africa and the cost keep soaring, so you have to do what you can to keep
your electricity bill down.
·
Switch off the TV when no
one is watching.
·
Turn off the lights when
you are not using them.
·
Buy energy efficient
products/appliances (this also saves the environment).
·
Unplug unused appliances –
only have chargers plugged in when you are charging things.
·
Wash your clothes in cold
water, and limit the use of a tumble-dryer.
·
Maintain your home – taking
good care of your house can save you lots of money.
·
Watch less TV. Do you
really need 300 channels? Going down a tier in your DSTV service can save you
some cash too.
·
Cell phone - change your
cell phone package to suit your real needs.
CAR EXPENSES
Keep your tyres properly inflated – you’ll prolong
their life as well as save on petrol. Regular maintenance of your car – like
your home – will ensure it lasts longer. Make it part of your routine to check
the car's oil, water and tyre pressure regularly. Live closer to work. It's
better to pay more for the house, an appreciating asset, rather than on petrol
and maintenance on the car.
at 05:54
These days, in our
world of instant gratification, it's more important than ever to be able to
stay focused on saving money any way you can. So to help you monitor your
spending habits and cut expenses, here are 20 easy ways you can save every
day—starting right now. How's that for instant gratification?
1. Make a weekly
"money date." Commit to sitting down with your money once a week
for a money date. During this time, update your budget, review your accounts
and track your progress against your financial goals. Like any relationship, if
you want your financial life to improve, you must spend time with your money.
2. Plan out your
meals for the week. Taking a few hours every weekend to grocery shop and
meal plan for the week will definitely save you money, as dining out is the No.
1 expense for most households. By eating at home, you save money that would
otherwise be spent on tax and tip—and you usually save calories, too.
3. Cut out cable. Gasp!
Cut out TV?! Never! But with services like Hulu, Netflix and Amazon Prime, you
can now watch your favorite TV shows and movies for a fraction of the cost of
cable TV.
A study by market
research firm NPD Group shows that cable bills will soon grow to an average of
R123 per month, or R1,476 per year. By switching over to an online service or
cutting out TV altogether, you can save that money for another financial
goal—such as paying off debt, traveling or saving for a down payment on a home.
4. Switch to an
exercise pass program. If you love working out, an exercise pass
program such as Class Pass is the way to go. By paying a membership fee of R99
per month, you are welcome at many of the best studios in your area. And
classes—like cycling, yoga, Pilates, barre, strength training, boot camp, dance
and more—are unlimited. This beats having to pay for each studio's monthly
membership or individual class fee, which can add up to hundreds of dollars a
month.
5. Host a potluck. The
more friends you have, the more money you spend on lunch dates, birthday
parties and gifts. Switch it up and, instead of meeting over a fancy dinner,
host a potluck and have everyone bring his or her favorite dish. That way, you
can save money you'd spend on restaurant extras, such as tax, tip and
parking—and you'll usually have a more intimate meal together, too.
6. Leverage
lodging rental websites. Finding a place to stay while traveling is so
convenient when you use a lodging rental website such as Airbnb, Travelmob or
Housetrip. You can often find a place that has a kitchen (so you can cook meals
at home to save money) at a rate that's comparable to hotels. You can even rent
out your own place on sites such as Airbnb while you travel to make some extra
cash to pay for your own travel expenses. It's a win-win scenario.
7. Make coffee at
home. This one's not my favorite, as I absolutely
love going to coffee shops and drinking delicious organic coffee. However,
spending R4 to R5 on coffee every day definitely adds up. So try my approach
and allow yourself a few days a week to buy coffee at cafés, and make it at
home the rest of the time.
8. Work more. When
you're working a lot, there's not much time left to shop and spend money. So
stay busy and pursue a career you love.
9. Wait 48 hours
before you click "buy." Since we can
have anything we want these days with just the click of a button (there's that
instant gratification again), you need to find a system to help buffer your
impulse purchases.
Example: Wait 48
hours before spending money on things that cost more than a certain amount.
When you do, you will find that, most of the time, the item was more of a
"want" than a "need." Plus, you'll save money and work
toward being more mindful with your spending.
10. Use blogs and
Pinterest to learn DIY beauty treatments. Self-care is
important—but going to spas and getting pedicures, massages, etc., can really
add up. Allow yourself a certain amount to spend on these things; then use
blogs and apps like Pinterest to find at-home beauty treatments to help you
save money. Often you can find a DIY organic option using common household or
kitchen products.
11. Outsource
online. Time is a commodity, and your time is
precious and valuable. And these days, there are so many tasks you can
outsource that will save you time and money. But how do you figure out if
outsourcing something is worth the expense?
A great thing to
do is to actually calculate the cost of your time, which will help you figure
out if you can pay someone to do something for less than your hourly rate.
Here's an example: A monthly net income of R3,000 divided by a total of 160
hours worked equals an hourly rate of R16.75. Now that you know the value of
your time, you can strategically outsource it using a service like Fiverr or
Task Rabbit for a fraction of your own hourly rate.
12. Get creative
with gifts. Find creative ways to express your love to
friends and family members with free, lower-cost or handmade birthday and
holiday gifts. After all, a handwritten note explaining why you love someone
can be more sentimental than some expensive gift he or she may never even use.
Most people will appreciate the thought behind your gifts more than anything,
so don't be afraid to save money and find free ways to celebrate birthdays and
holidays.
13. Choose quality
over quantity. This can apply to food, clothes, electronics and
much more. Although it's tempting to choose the more budget-friendly version of
an item, sometimes choosing quality over quantity will save you more in the
long run. Save up your money and get the best-quality product you can afford,
and leverage the cost-per-wear philosophy with more expensive clothing and
shoes.
This
applies to food, too: Buying quality organic food can nourish you in ways that
fill you up more than the prepackaged, processed stuff and potentially save you
money on health-care expenses in the future, since you're taking good care of yourself.
Find a balance that is right for you and choose quality whenever you can.
14. Deal with your
emotions. Excessive spending is often a way to avoid
feeling certain emotions. If you check in with yourself before you go on a
major spending spree, you may be able to identify if you're feeling bored,
lonely or stressed and are therefore spending money as a means to avoid the
underlying emotion. Check in with yourself before you buy, and be mindful with
your spending.
15. Stop trying to
keep up with the Kardashians. It's hard to keep your
blinders on and not compare your financial life to that of others, especially
celebrities. However, it is really important to be clear about what matters
most to you and make sure you build a financial plan that supports that vision.
This will keep you moving toward your financial goals and stop you from
spending money on things you don't need, to impress people you don't like.
16. Read a
personal finance book. When you learn about personal
finance, you'll learn even more strategies to help you save money for your
goals in life. Knowledge is power, and the more you know, the more you can
save.
17. Balance your
"FOMO/YOLO" mind-set. With social media
controlling our lives like never before, people often fall victim to the
"fear of missing out" phenomenon and instead go overboard with a
"you only live once" mentality.
While it is
important to live in the present and soak up each precious moment of life, make
sure you balance that out by saving for your financial future, too. Without
checks and balances in place, you can find yourself saying yes to everything
and spending more money than you have—all due to the fear of missing out.
18. Map out your
financial goals. Be very specific with your financial goals.
For example, saying, "I want to save for a home down payment" is not
enough. You need to map out how much you need, by when and what you need to
save every month in order to reach the goal. When you know what your targets
are, you're more likely to stay the course and continue saving for them for the
long term.
19. Keep your eye
on the prize. Staying focused on your goals takes discipline and
determination. Saving can be easy and exciting at first, but after a while you
may lose that initial motivation and start to find other things you can spend
that money on. To avoid veering off course, check in with your goals regularly
and keep your eye on the prize.
"The truth is, there are
many ways to save money. Find the ways that work for you, and slowly start
incorporating the strategies into your life."
20. Track your
progress. South Africans save only 5.5 percent of their money
compared to the 20 percent that personal finance indicates you should put away.
But instead of feeling ashamed about your lack of savings, just start by saving
something.
Even 1 percent is
better than nothing. Track your progress and continue to increase the number
year after year. Step by step, day by day, you can get to that 20 percent
savings level.
The truth is,
there are many ways to save money. Find the ways that work for you, and slowly
start incorporating the strategies into your life.
—By Brittney
Castro, founder and CEO of Financially Wise Women.
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