Saving: Expectations versus Reality
By: Kgopotso Kgwedi
“Money is only something you need in case you don’t die tomorrow” were the infamous words delivered with fervour by Carl Fox in the movie Wall Street. Money may not constitute all the happiness in your life as you know it but it certainly does go a long way in alleviating the burdens that come with keeping up a certain lifestyle and securing your future financial needs when you have retired.
The Expectations of Saving Money
In a perfect world saving is simple: spend what is left after saving. The answer to the crucial question “Why do we save?” and the expectations that come with it are as surely feasible as deciding to put away a sizable amount of your income in the recently opened savings account every month for the big three: a goal, emergencies and retirement. But the reality of saving will deviate from your imaginings all together and pose challenges that will require solutions that you might not have considered yet.
The Reality of Saving Money
- Re-Assess Your Financial Status (Twice)
Drawing up a concise plan of how you will spend your money sparingly in order to save for a rainy day is painless but sticking to said plan can prove difficult. Thoroughly going through your finances to assess where you stand will help you determine how you can start your saving journey.
Recording your every financial step will aid you in identifying areas you can cut down your spending without subjecting your family to a life of extreme cheapskates. One thing to bear in mind while cutting down on your expenses to make room for your new saving habit is your lifestyle choices going forward. Adding “savings” in your “expenses” column wherein the recommended 10 – 15% of your salary is put away will help clearly show where your money is going.
- Set Financial Goals
Now that your lifestyle matches that of your current budget, financial goals need to be set. “What is it that I am saving for?” is the first question you will need to ask yourself. Whether you are saving to afford your children’s university fees, pay lobola (dowry), buy a dream home, have a comfortable retirement, or simply preparing for unfortunate events like retrenchment, you need to give yourself a deadline for when you will achieve these financial goals.
Whether you are saving for a short- or long-term goal, you need to have a projected amount that you will need to save over the period of time you have set for yourself and stick to it. One way of doing this is to set scheduled monthly transfers to move money into a separate account just for those purposes. Setting achievable short-term goals will assist you to be aware of how far you have come and how close to achieving your ultimate goal you are.
- Know Your Savings Options
Saving your cents and the occasional notes in a piggy bank hidden in the shoebox in your wardrobe at the ripe old age of 25 may work for some but it definitely does not work for most. The days of being classified as “unbanked” should be heavily reconsidered on your part. Opening an account specific to your saving goals while having the added bonus of being efficient and gaining interest over time is a benefit you cannot miss out on anymore. By doing so, you can use this one account to serve multiple purposes while subsequently setting aside money no matter what happens and, more importantly, be 80% less likely to dip into your financial reserves for reasons only detrimental to achieving your goals.
A flexi fixed deposit account will offer you an interest rate of 3 -7 % and the percentage is based on the amount of money that you save. If you are looking to save for a term of 5 years for example, a fixed account offers a rate of between 6 – 10 %. Once you’ve managed set up a monthly automatic transfer into the account you can decide to extend the savings period to suit your savings goals.