By Nestene Clausen, local author of Tips, Tricks and Checklists from a Tax Practitioner and Managing Director of The Audit Pro
Fact: The South African household savings rate is zero. Research indicates that for every rand one local household saves, another squanders on credit. Startling facts such as these, and many more, are reasons why World Savings Day was created. The global day of significance heightens public awareness about the importance of savings and its critical role in the global economy.
Earlier this year South Africa’s unemployment rate spiked to 29% (the highest level since 2008), bringing the number of unemployed to 6.7 million and positioning SA with some of the worst records in the world. With unemployment at an all-time high and “junk status” still looming upon us, it’s even more important for South Africans to proactively manage their savings.
Save now, save later
Taking place 31st October with the theme ‘saving money to gain a higher standard of life and to secure the economy’, World Savings Day encourages consumers to take action – starting with a budget and savings plan.
According to recent media headlines, South Africans spend a whopping 32,55% of their budget on housing and utilities. Another finding indicates that, on average, SA households spend more on recreation and culture than on education.
It’s time for locals to wake-up and smell the prosperity, and the best way to kick-start a budget is with micro-savings. Listed below are ten simple steps to follow for an effective and simple budget plan, after all – every bit helps:
- Create additional sources of income: Budgeting is not only about expenditure. Find ways to create extra sources of income and put it aside in a high interest bank account. Extra income quickly adds-up and left untouched in a separate account each month can be invested wisely.
- Continually track spending: Even if spending varies from month to month, it is important to track spending to identify spots to save. Simple items such as coffee takeaways can easily add-up each month.
- Use Apps to streamline your budget: New Apps such as Stash, for example, will automatically take cents left over on transactions and save them. Similar Apps include Acorns and WiseBanyan, for bank accounts abroad. Other Apps such as 22Seven enable users to automate their budgeting process in order to spend less and allow for time to make the right buying decisions.
- Identify monthly payments and debit orders and know what they are for.
- Categorise your spending and identify variable expenses.
- Develop a plan that is realistic: Identify areas to save and agree to a set amount to add to savings. Coach.me is a habit tracking platform that can help users stay on track.
- Determine expense categories to decrease spend and determine how much funds you can apply for each. For example, fast food can be replaced with fresh produce on a monthly/ weekly basis.
- Create a monthly calendar with all incoming contributions: such as salary, combined with regular outgoing bills. Add holidays, special events and birthdays to help budget and track additional spending.
- Create a debt payment plan and add this to the calendar.This will help track progress.
- Add a network tracker to monitor progress over time with the overall budgeting plan
“The only way that you can get into a habit is to actually start it. This takes willpower, but once the habit is familiar, bingo – you are officially saving” Nestene Clausen, local author of Tips, Tricks and Checklists from a Tax Practitioner and Managing Director of The Audit Pro
The process of finding a system that one can easily and systematically follow takes time to master, but there is no better time than the present. A budget should accurately reflect cost of living and therefore everyone’s requirements will be different.
With more than 67% of economically active South Africans not having a retirement plan in place, locals are urged to start saving and World Saving’s Day is a great initiative that heightens the importance of this. The first step to budgeting starts with identification of expenditure, and once individuals understand outgoing costs, we can justify what needs to be coming-in and how to balance the two. Let the balancing games begin!