We live in a world where our lifestyles are routinely compared to others. There is no doubt that social media and the perpetual need to compete are contributing to this ongoing pressure. This cycle is not only taking a toll on the mental wellness of South African’s, but on people’s savings accounts too.
South Africans have a very low saving rate, which has been getting worse. This is highlighted in a recent survey showing that middle income families contribute only 6% of their money to things like investments, healthcare and savings. Some people have even given up saving all together, believing that living in the now will get them through to a better time when they plan to recommit to a budget and saving.
In addition, these are challenging economic times, with high interest rates and rising costs of just about everything.
This Savings Month, a panel of experienced Liberty financial advisers share tips on how to create strategies to save and change your emotional need to spend.
Never neglect your future
Liberty Financial Adviser, Ben Kleynhans points out that how you choose to save will help shape your future and with some small lifestyle changes you can keep track of your spending.
He believes we need to begin by examining our desires to spend on things we may not really need.
Kleynhans believes that the biggest obstacle is that people do not take stock of their spending habits: “It is very easy to get things like loans, but ask yourself if you are prepared for the repayments. If you lack the discipline, it can create a problem. It’s just too easy. Social media is not helping because we see others with things we want,” he says.
He advises speaking with a close partner about spending money before splashing out and mastering the art of a cooling period, when you desire something you do not need.
“And in doing so do not criticize the partner or spouse’s spending habits. And if you are able to wait a week before making a significant purchase, you may change your mind.”
“It’s normally an eye opener for people when they see what they spend their money on, especially when dining out a lot for example. Just skipping one night out a month can make a huge difference and you’ll be happy that you do when you see the saving here,” he says.
Creating a savings plan
On the subject of changing spending habits, Liberty Executive Wealth adviser Carlo Gil says the ability to adapt to new savings habits is key to maintaining your lifestyle as best you can.
“The increased cost of living means people either have to lower their standard of living or find alternative ways to fund the lifestyles they have become accustomed to, making it challenging to set aside money for savings.”
He believes developing good savings habits is essential for long-term financial health, across all lifestyle brackets. This might mean small sacrifices, but it will be worth it in the long run.
Gil shares the following tips to consider:
Consistent Saving: Make saving a non-negotiable part of your financial routine, regardless of the amount.
Live below your means: Adopt a lifestyle that allows you to save rather than spend up to your income limit. Examine your spending habits and find savings, they are certainly there.
Investing wisely: Never disregard the benefits of investing as a way to grow your money and achieve financial goals faster. Also stay insured against the bumps in life, things can get much worse if you’re not.
Regular financial check-ups: Periodically review your financial plans and adjust them as needed to stay on track. Annual meetings with an adviser should be a priority to make sure your goals are aligned with any life changing events.
Remember change is constant
In addition, a level of discipline is required to stick to a goal. Darrel Brooks, another Liberty Financial Adviser, says maintaining a positive attitude is key to changing spending habits if you have a desire to save, and he believes things do get better.
“We are at the peak of the interest rate hike cycle, and we could see rates come down which is a good thing for consumers. When this happens, consumers should at best continue with their savings habits, try and continue as before and maybe reduce any debt burdens which can inhibit further saving.”
He emphasizes the value of budgeting.
“The reality is that it’s tough to save what you don’t have. Many are forced to choose between the essentials of daily living and savings. However, many households have neglected the all-important aspect of budgeting, which I believe is crucial in creating the habit and culture of savings.”
Adapt to the situation
As the advisers here have pointed out, making small lifestyle sacrifices are easier than you think.
The key is being adaptable no matter what the circumstances. Always maintain a view of the future. And in doing this create a budget that you can live with. It is possible if you take a good look at your spending.
It’s a truth that good times and bad come and go. You just need to change yourself to make it all work.