Don’t buy into the crazy festive season, rather buy into your financial future

2017-12-14 07:52

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We’re approaching silly season and for the next 6 weeks it will be about festive season shopping and how to treat your loved ones during this festive period and consumers will be bombarded with the shopping specials.

While the economic realities continue to put pressure on our disposable income and ability to save, the 2017 Old Mutual Saving and Investment Monitors research showed that the same economic realities are also positively impacting the general attitude held towards saving. This year saw an encouraging increase in the percentage of people who identified themselves as “savers” as opposed to “spenders”. South Africans are really starting to feel the competing pressure of their future well-being, the need to save and invest, as well as the immediate demands of day to day expenses.

Your year-end bonus, something over and above your salary is the ideal opportunity to jump start your investment portfolio. Investing, perhaps for the first time, will be less intimidating if you have a little bit of extra money to put away.

We chat to Elize Botha, Managing Director of Old Mutual Unit Trusts, about her end of year saving tips: 

3 rules for saving: 

#1 Develop and plan. set a goal. Before you invest a rand, it’s really important that you come up with a plan for your money. The New Year is the ideal time to introspect and think about your goals for 2018, and what about you want to achieve in five year or ten years’ time. Think how much money you will need to make these goals a reality. How could you invest your savings to make it happen? What return you’ll require, or what type investment risk you can take to it a reality.

#2 Determine your initial investment. It’s also important to be realistic about your finances. Investors can consider applying the 50 / 30 / 20 budget rule to their year-end bonus. Consider using 50% of your bonus to pay off high-interest debt first, this is usually any form of personal loans and credit cards. Use at least 30% of your year-end bonus to top up your financial priorities. These are the goals that are essential to achieving your financial freedom. This could be your retirement contributions, emergency savings or other long term goals. Finally, as long as you've taken care of financial future first, you can spend the last 20% of your bonus on wants, instead of needs

#3 Consider which assets to buy. Inflation, and not market volatility, is the real threat to your financial goals. Many South African opt for ‘safer’ options, such as leaving it in the bank or withdrawing their funds to ride out volatility, but what they don’t realise is that by losing time in the market, they’re losing money to inflation. If you investment horizon is shorter than 5 years, you have the flexibility of buying a wider range of investment assets, including growth assets, like property and shares, which offer the greatest protection against inflation. 

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