South African consumers are already feeling the pinch as economists warn of a global recession. Fuel prices are at all-time highs, essential groceries are significantly more expensive, and it will cost you more to keep your lights on because of load shedding than it has in the past.
With the cost of living rising, and salaries not increasing at the same rate, good money management has never been more important. While your immediate priorities may be paying bills and putting food on the table, this is also the time to save and invest for the future.
It’s all about striking a balance between short-term and long-term thinking. It is never too late to develop good financial habits.
All Savings, No Matter How Small, Help
The limiting narrative that saving and investing are luxuries that cash-strapped consumers cannot afford can end up being just as costly in the long run. Savings serve as a buffer against life’s unexpected events, reducing your reliance on credit to cover unexpected expenses.
Even if you start small, developing a healthy investment habit can help you build a safety net to help you get through difficult times. It also means that your future plans, whether they are for your children’s education, a home renovation, or a holiday, will remain within reach.
10 Simple Steps To Save In A Tough Economy
With so many people experiencing financial hardship, you may be considering postponing your savings and investing goals. However, even during a period of financial uncertainty, you can flex your savings muscle and continue to save money—even if you have to shift your timeline. Here are ten strategies for staying on track:
1. Reduce Expenses—Even Those You Want to Keep
Trimming your variable expenses is a good place to start. Buying groceries is usually less expensive than eating out. But, before you go shopping, check your pantry to see what you already have. If you plan your meals ahead of time each week, you’re more likely to make wise shopping decisions and avoid food waste, which becomes money wasted.
If you’re not getting your money’s worth from a streaming service or a gym membership, eliminating this type of recurring expense can help. It also doesn’t hurt to call DSVT or your phone contract provider and see if you can downgrade your package.
If you can find a larger, consistent expense to cut (for example, getting a roommate to reduce housing costs), you can significantly improve your bottom line.
2. Recognize Your Incomings And Outgoings
Examine what you have coming in and out of your account each month in terms of bills and payments. This will give you an idea of what you might be able to save or if you need to make any sacrifices to make ends meet.
3. Make a Budget for Yourself
If you aren’t already on a budget, now is the time to start. The only way to know how much money is coming in and going out is to create a budget. It can also assist you in ensuring that your spending is consistent with your values and goals.
Begin your budget by listing all of the money that comes in and goes out of your accounts. Fixed expenses, such as rent, bond, and car payments, remain consistent month after month, whereas variable expenses, such as entertainment, utilities, and groceries, fluctuate.
Make sure your budget takes into account both your short- and long-term objectives. Some experts recommend following the 50/30/20 rule, which states that you should spend 50% on necessities, 30% on wants, and 20% on savings, whether for a long-term goal like retirement or a short-term goal like putting down payment on a house. Those guidelines may not be applicable to you, so make necessary adjustments.
4. Make Saving A Habit
Making saving automatic is the simplest way to develop the habit of saving money. Set up automatic transfers from your bank account to a savings account. Even if you can only contribute a small amount each month, consistently putting money away can help make saving second nature.
5. Continue To Save for Retirement
Though the stock market’s ups and downs can make new investors nervous, don’t get too worked up. Investing can help you build wealth over time and withdrawing all of your money from the market is a sure way to derail your carefully planned savings plans.
6. When Should You Put Your Savings on Hold?
If you’re having trouble paying for basic necessities like food and medicine, it’s OK to take a break from saving until you’re able to get back on your feet.
This is why having money set aside for a rainy day is essential. If you’re struggling to make ends meet, concentrate on trimming your budget and getting through the next pay period, and trust that you’ll get back to saving as soon as possible.
7. Maximise Your SARS Tax Benefits
If you receive a SARS refund, it’s easy to see it as “found” money and succumb to the temptation to overspend. However, your future self will thank you if you put it in savings, pay up high-interest credit card debt, or apply it to student loans. This can help you get out of debt faster and save money over the life of a loan.
You never know when you’ll need extra cash in these tough times, so if you don’t already have a savings product in place, starting one is another good use for that tax refund. According to experts, you should have enough money saved to cover three to six months of basic living expenses.
8. Maintain Your Motivation
It’s critical to celebrate “small victories” along the way to reaching a savings goal. Take a moment to splurge if you’re halfway to saving six months’ worth of living expenses in your emergency fund, for example.
Perhaps it’s purchasing new running shoes with the money you saved by cancelling your gym membership and instead doing fitness videos online, or purchasing a new kitchen gadget with the money you saved by buying groceries and cooking at home instead of dining out. And keep in mind that the occasional latte will not prevent you from retiring on time—just make sure you’ve budgeted for it.
9. Maintain An Emergency Rainy-Day Fund
While we prefer to save for a specific purpose, you should have a rainy-day fund in case of an emergency. Aim for three to six months of expenses in this pot, and be sure to replenish it if necessary.
10. Seek Professional Assistance
If you have the opportunity to speak with a financial advisor. They can assist you in developing a financial plan that is unique to you and will guide you through the ups and downs of life, while also adjusting it to reflect your current circumstances.
Conclusion
True financial peace of mind comes from taking charge of your finances and developing sound financial habits such as budgeting, saving, and investing.
This will enable you to weather the storm and thrive when conditions improve.
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Maysure Financial Services is a registered financial services provider. FSP 15173