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How to spend less and save more

By Faeza
29 March 2016

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In the current economic climate, saving money seems impossible and most of us live from pay cheque to pay cheque. But there are places where you can cut spending - and even save a bit ...

It's all about taking responsibility for your spending.

Step 1

Start by reviewing your bank statements (at least the last three months are recommended) and categorise each transaction. A programme like Excel is an excellent tool. This exercise will allow you not only to understand debits and credits, but will also help you to see where you are actually spending your money.

Step 2

Review your debit orders: explore transferring these to the first of each month which will allow you to determine what is available for the rest of month.

If you are insured, shop around for cheaper insurance. Maybe look at consolidating your debt (mortgages, cars and loans) – it is often cheaper to pay one debtor as opposed to many.

Only once you have a complete understanding of your spending habits can you make changes to them.

Step 3

Now that you understand your spending habits, it is time to determine your essential weekly cash requirements. I recommend you open a separate secondary transactional account which is automatically credited weekly with a sum that meets these needs.

Once you have done this, play a game with yourself by trying to reduce your weekly outlay. This will ultimately help you establish new spending habits. As time goes by, you will see the balance in your primary account grow.

Step 4

Imagine you are able to use this spare money to save R1 000 per month, and assume your assets achieve a return of 10% per annum; what is the possible effect on your pocket over time?

The results, especially in a compound interest bearing account, will see you well rewarded. If you put R1 000 per month under your mattress, after 10 years you will have accumulated R240 000, if you are earning a compounded 10% per annum, this amount will jump to a phenomenal R765 697.