Karin Muller, the head of Sanlam Growth Markets Solutions suggests four empowering money moves you can make this month
In March this year, the total outstanding consumer credit balance for South Africans was a staggering R1.45 trillion, according to the National Credit Regulator.
There is no better time than Savings Month to pull up your socks, tighten your belt and rein in that spending urge.
Track your daily spending habits
1 Get into the habit of recording every cent you spend and you will soon form a clear picture of where your money is going.
This exercise can take as little as five minutes a day and there are good apps available online to help categorise your spending.
For example, visit www.imore.com/budgt-iphone-review. Common drains include visits to your local coffee shop, bottled water and bought lunches. Cutting back in your trouble areas will free up money for savings. These apps can also help you set up a budget – critical if you want to be in control of your finances.
Don’t pay off short-term debt with long-term savings
2 The recent Sanlam Benchmark survey revealed that more than half of South Africa’s pensioners are not making ends meet.
There are a number of reasons for this but one of the biggest factors is the depletion of retirement money during working years.
When you change jobs, you have two options: to reinvest the money you accumulated during your years at the previous job or to disinvest the lump sum and take your cash out.
It is often easier for the employee to take the money than to reinvest it. The treasury has put forward a retirement reform proposal to address this problem.
Unfortunately, the money that is cashed out is seldom, if ever, reinvested. 46% of the people polled in the Sanlam Benchmark Survey who withdrew their retirement savings used the money to pay off short-term debt, and 29% used it to cover day-to-day expenses.
The reality is that it is impossible to ever make up the savings if you start saving again from scratch.
This is because you cannot make up for lost time and the savings loses its compounding momentum (compounding refers to generating earnings from previous earnings).
Keep on top of your retirement savings
3 Keeping regular tabs on whether you are on track to maintain your current lifestyle after you stop working is a very smart move.
Most South Africans won’t save enough for their retirement, but there is no reason you should join this statistic.
Sanlam has made it very easy to see if you are on track to retire comfortably with this simple calculation:
» After working for five years, you need to have saved 1 x your annual salary
» After 10 years, 2 x annual salary
» After 15 years, 3 x annual salary
» After 20 years, 4 x annual salary
» After 25 years, 6 x annual salary
» After 30 years, 7 x annual salary
» After 35 years, 10 x annual salary
» After 40 years, 12 x annual salary
Ask your retirement fund and retirement annuity provider for the current value of your retirement savings, work out your annual salary and how many years you’ve been working for, and you’ll soon see if you are on track.
If you are not, consult a professional financial adviser to make a plan to increase your savings.
Save any bonuses or salary increases
4 Whenever you receive ‘ad hoc’ money such as a bonus or salary increase, keep it separate from your day-to-day expenses and save as much of it as you can.
Settling debt is also a smart move to make with this money, but once this is done, anything left over should be used to boost your savings.
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