All of us worry that we don’t save enough money each month. We set goals and always try to budget better, but sometimes saving seems impossible. Earlier this month economist Dr Adrian Saville, professor at the Gordon Institute of Business Science (GIBS), revealed that the average savings rate in South Africa is actually zero.
There certainly are households who save through contributions to pension funds, retirement annuities, unit trusts and investments in their homes and properties, but the shocking truth is that South Africa’s household savings rate is zero
How Is It Possible That The Savings Rate Is Zero?
Although many South Africans do save each month, these are largely cancelled out by people using credit. By spending more than you earn using credit, you are in fact negatively saving. So each consumer with a positive savings rate is being ruled out by another with a negative one.
How Can You Save More Each Month?
The ability to save comes down to discipline. Consumers who put strict measures in place when it comes to their finances are more likely to be able to save.
1.) Pay Yourself First
The golden rule when it comes to saving is to pay yourself first. What this means is that you direct money into your savings accounts as soon as you get paid. Usually, consumers wait until the end of the month and see what is left. By saving first you eliminate the temptation to overspend.
2.) Get Rid Of Debts
Taking out loans, using credit cards and store cards is a costly exercise. Many consumers don’t understand the actual cost of credit. High interest rates and fees on unsecured debts can quickly eat up your income. Focus on repaying high interest debt and work towards a clean credit record.
3.) Focus On Your Budget
Most people think that they are good at budgeting, but the reality is that you’re probably not doing it right. Budgeting involves listing ALL monthly expenses to see where your money is going each month. This includes looking at the smaller costs such as banking charges, water and electricity, clothing, home maintenance and subscriptions.
Once you have a budget in place you need to review it every month. Without reviewing your budget and matching your spending, you won’t know where you went wrong and overspent.