Tips to start saving right now


South Africa's increasing budget deficit is of great concern, considering the high levels of unemployment which means less taxes can be collected from South Africans, says Sisa Cikido, head of retail investment at Nedbank, reflecting on the recently announced Budget 2020.

"I am still weary of how the much-needed growth will be achieved. The minister mentioned a focus on inefficiencies which will assist in cost reduction which is imperative in the absence of organic growth," commented Cikido.

"Overall, I think the speech was positive for the average South African due to a reduction in tax and no increase in VAT. There is also hope for South African businesses as there was mention of reducing corporate taxes."

Cikido urges South Africans to try by all means to factor savings into their monthly budget and to be deliberate about saving.

"It won't just happen. I like to use this simplified budgeting tool: allocate 50% of your income to your needs (like rent, groceries, medical bills); 30% for things like shopping and hobbies and 20% to saving (including debit payment, a rainy day fund, and long-term investing)."

Cikido's tips to make investment a bigger part of your financial life:

Max out tax-free first

Avoid using a tax-free account to transact as the allocation is once-off and cannot be recovered.

When starting your journey, contribute the maximum tax-free allocation of R36 000, and if you have extra money left, explore further options that suit your risk appetite and profile.

Cut unnecessary costs

It might seem that everything in the budget already is essential, but you can always do more to bring your living expenses down.

Even a small change can add up over a year and help you save. Stick to the new budget and put your savings to work in your investment vehicle.

Leverage tech

Mobile budgeting apps are surprisingly effective in helping you track your spending. A good app can be a powerful tool in not only reducing unnecessary spending, but also uncovering great investment opportunities without feeling a major strain in your quality of life.

If you already have some surplus cash, you can put as little as R1 000 to work for you and enjoy the benefits and returns of a fixed interest rate while building up a sizeable nest egg over the long term.

"Less is not just more, it is everything. We all need to find ways to make our money stretch. We also need to save where we can. The recent repo rate cut means credit will cost most of us less than it did a few months ago, one should consider allocating that buffer to an investment account," concludes Cikido.

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