Any bank will tell you that if you want to save money, you should draw up a budget. But before that you must first decide why you’re saving.
‘You need to set a financial goal, such as buying a kitchen appliance, paying off debts or funding your child’s education,’ says Sbusiso Kumalo, head of corporate affairs at Capitec Bank. A goal gives you a specific amount to work towards, so it’s easier to plan your saving strategy.
For example, you may have to buy new winter school clothes for your child or give her cash for that annual school excursion in October.
Step 1 – Determine your goal
Make a list of what you need to buy and add up the costs. This is your goal.
Step 2 – What can you afford to save?
Now work out how much you can save each month towards this goal. To do this, make a list of all your regular bills:
- account payments
- school fees
- food (look at your till slips to work out how much you spend on food)
This is your expense list.
Add all your expenses together and subtract this amount from your after-tax salary.
What’s left over we’ll call your spare money:
- Take about half of this amount to put away monthly.
- Keep the other half to cover any unexpected expenses.
If you can’t cover everything with what you earn, look to cut expenses that are unnecessary or simply too high. Here are some ideas for where to cut.
Step 3 – How long will it take?
You need to know your time frame, in other words, the number of months you’ll have to save in order to reach your goal. To do this, divide your goal amount by what you can afford to save every month.
You now have a goal, and you know the amount you can save monthly as well as for how long you need to save.
If you stick to your budget and save the amount you calculated, you’ll reach your savings goal!
How to divide your salary
Here’s how your salary should be allocated in order to stay out of debt and grow wealth, according to the Old Mutual Savings Monitor:
- living expenses (17%)
- bond or rent (30%)
- paying off debts (16%)
- insurance/medical aid (8%)
- savings (19%)
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