Have you been putting saving on the back-burner for lifestyle expenses, the kids’ tuition or settling debt? You’re not alone! Luckily, financial freedom is within reach.
You have the #travelgoals, #housegoals and #cargoals, not to mention wanting to keep the lifestyle you currently enjoy once you reach retirement. But saving goals? Those are the first steps to reaching all the others, and yet, we have become really crafty at making all the excuses possible to avoid putting away those rands. Well, that stops today! ‘Changing your habits and thinking is a process, and it doesn’t happen overnight,’ says Beta Wealth financial planner and wealth specialist Henry Poulos. ‘A step forward, no matter how small, is the beginning of financial freedom.’ So, every time that little devil on your shoulder makes the following excuses to stop you from saving even just that R100, knock it off its perch with these handy saving tips.
- ‘I’m too young’
Your youth is actually more of a gift than an obstacle – it’s all about the attitude you take with your money management. ‘If you are young, you’re lucky,’ says Henry. ‘This means you have time on your side and if you invest now, then the power of compounding that growth will mean much higher savings or retirement or that rainy day.’ Consider these two cases: If you start saving R1 000 every month at 9% starting at age 25, by the time you’re 60, you would have R2.5 million. If you only start at 40, you would need to invest four times as much monthly to reach the same goal. The benefits of time aside, youth is comparatively more affordable in some areas – life cover and disability cover are cheaper. These expenses increase as you age and your health gradually deteriorates.
- Whatever I have to save won’t make a difference’
‘We are an instant gratification society,’ says Henry, ‘but we need to have patience and persistence to get to financial freedom’. Yes, this is a challenge of sacrifice and commitment, but the reward is sweet. ‘Imagine you are not reliant on your monthly salary, but you have an emergency fund in a unit trust and a tax-free savings account, your car is paid off, you don’t have credit card bills in the post, you have an apartment, an retirement annuity (RA), and some cover in place for death, disability or severe illness.’ Get into the habitual mindset of seeing every rand saved as a rand earned – instead of trading it for something this instant, hang on to it and add to it so you can watch it grow and buy you what you really want further down the line.
- ‘Well, I’ll catch up once I’m earning more’
Pulling into Procrastination Station is easy at the moment, but risky for the future. Don’t get us wrong – it’s good to be positive about your future earning potential, but a dose of caution and preparation won’t go to waste. ‘People are more optimistic about their future prospects than statistics or reality dictate,’ Henry says. ‘Start good habits and get your savings going now because life happens.’ Instead of living in fear of the inevitable bumps in the road, create your own buffer by putting away a little bit of cash here and there in case you have a health setback or things on the job front don’t follow your plan.
- ‘I can’t afford it, and I have too much debt
According to Debt Rescue statistics, a brow-raising 10 million South Africans are in debt, and more than half are women. Even more concerning is that 72% of South Africans’ income goes towards settling their debt. The initial outstanding amount aside, interest rates can bite if you do not make Mission Financial Freedom a priority. ‘Normally, people are paying 16% [interest] and higher,’ says Henry. ‘I have seen 22% interest on their debt. This is an unbelievable expense saving you can take advantage of if you pay off that debt, and it is a guaranteed return.’ When it comes to the ‘better’ of the debts, a house bond is something to consider. ‘You are leveraging growth on the capital growth of your property, so once your credit cards, debts and card are fully paid off, start saving.’
- ‘But I do not want to compromise my comfortable lifestyle’
There’s nothing wrong with wanting to hang on to the smaller expenses that make your life a little easier – but take note of the difference between this and the luxe lifestyle you want for yourself years down the line. ‘If the comfort you are taking now is over-extending your budget and you can’t afford to save or have cover, then you are taking a step backwards and will become a slave to your salary and lack financial freedom,’ warns Henry. Is it really worth being surrounded by flashy big-ticket items, only to lie awake at night worrying about how you’ll pay for tomorrow’s necessities? Do not underestimate the value of peace of mind when it comes to your future.
- ‘I need to get the kids through varsity first’
Any responsible parent would make this a priority when thinking about their family’s future – and that’s a good thing! But the trouble is that you end up sacrificing your own livelihood and well-being by not making yourself a priority in your family’s future too. ‘By the time your kids get through university, you may be close to retirement or your health could deteriorate, making work difficult,’ Henry cautions. ‘My wife and I have just had our first baby, a lovely little girl. But we didn’t wait to start saving before she arrived. We started long before she arrived. Get cover, start investing, crush your debt one month at a time.’ This will make the financial blow of tuition expenses more manageable, and put your mind at ease once your kids leave the nest.
Words by Dominique Bowen