The Saving Game

You would probably agree with me that towards the end of the month you begin feeling the pinch and cannot wait for payday to get that much needed cash injection. Many of us claim to have "no money left" and statements such as, "I can't wait for payday" or "boss, push the button" start to reverberate around the office space. While yes it is important to be able to sustain oneself during the course of a month, surely it is equally important to have a savings plan in place?

I am not talking about becoming a millionaire over night and I would never advocate that we use unreliable and dangerous methods to accrue wealth. I do however firmly believe that as a society we struggle to understand the value and (relative) ease of saving money.

I read something alarming a few months back that left me with a very unsettling feeling. South African's in general are among the worst in the world when it comes to saving money...the reasons for this are numerous:

Economic downturn

Rise in consumer spending habits

Unemployment

Taking out too much credit

Etc Etc Etc..one only needs to perform a quick check on the net to go into more detail on the points outlined above.

My question however is why? Why do we find it so difficult to save money? I understand that people on minimum wage and especially those dealing with unemployment would find it difficult to put something away each month. But for those people who find themselves in a middle to upper income bracket surely the saving game is more accessible? We live in a world where information is available at the press of a button and myriad strategies exist to help us understand the value of saving. Then why do so few of us ever get round to trying it out?

No matter what book you read, which internet site you follow or financial advise seminar you attend, unless you put the simplest elements of the advise into practice you are never going to get anywhere. It's like dreaming of becoming a chef but never actually attempting to read a recipe and try it out. There will never be progress unless the first steps are taken.

I believe these first steps can be reduced to very simple elements:

1. Pay yourself something first at the beginning of the month - even if this is a meager R250...if you can get used to this you have already started down the road to creating a foundation.

2. Make this a habit - not only will you become comfortable doing without the extra cash during the month, it can become highly addictive watching the numbers increase as time goes by.

3. Do not worry about it in the moment - people do not save as they fail to see the end game - the goal is not to have a lot in savings next week, but what about a year from now, 3 years, 10 years?

4. Choose a platform and stick to it - there are numerous savings vehicles out there, from run of the mill savings accounts that yield minimal interest, fixed deposits, call accounts, unit trusts, ETF's and other stock market options etc...the latter of these can become complicated for the average Joe. However if you do not at least begin to utilize one you will never get anywhere...even some long term unit trusts can be accessed from as little as R200 per month.

5. Keep it simple - you do not need to become a stock broker to save a bit of cash. If you are of the opinion that saving R250 per month is pointless think about it this way, over course of a year already you have R3000 more put away than you began with. Even with a simple multiple transaction fixed deposit account you can earn up to 5.35% interest, which is not a lot but at the very least your money is receiving a basic form of growth.

6. Stop worrying about image - now this one is a bit more difficult to engage with as we all want to appear successful and flash the latest smart phone or drive the fancy car. I often wonder how many of those people doing this can actually afford the perceived lifestyle they are putting out to the world. How many actually OWN that car vs how many simply have it at the expense of a credit card and high interest repayments...two very different paradigms. I am no financial advisor and I do not purport to have millions in the bank...maybe one day...but for now I would urge all of you to take a good look at what you actually need and do away with those money sapping fashion items that make you feel good in the moment but leave you desperate in the long run.

The power of compound interest is real and over time you can secure a degree of financial freedom. This will however never happen unless you start somewhere. If you are 25 years or younger at the time of reading this then you are in an even more fortunate situation as you have time on your side.
So go on, try it out, do not expect miracles from the get go...but revisit this article in a year or so and see how different your situation is. even if all you have gained is a few thousand rand saved up, it is still a few thousand you can be proud of. Be dedicated and vigilant and you will see the numbers increasing slowly but very much surely.