When the subject of money is raised, we often focus on investments, buying a car or a home, education and medical aids. We rarely take the time to evaluate our overall behaviour with money.
Nolene Parboo: Head of Savings & Investments at Standard Bank shares 10 suggestions that can help you modify your spending behaviour to boost your finances:
- The morning coffee run can cost as much as R25 a day. Take that cost over the month and the total cost comes to R750. That’s R9 000 a year. If you invested R750 per month for 5 years at a seven percent return, you would accumulate R53 000 in savings.
- You may be coping with your clothing account payments, but the interest payments are often high. Many people complain about car payments, but often their retail accounts add up to much more and are expensive to repay. Consider cutting down on some of your retail accounts. This will not only help you to save, but will also improve your wealth significantly in the long run.
- It is important to be saving for retirement, but you keep finding things in your budget that need more attention like DSTV and your golf membership. You could easily be spending over R1 000 per month on luxury services you don’t need. Decide what is really important and what you can do without.
- Never go shopping without writing a shopping list beforehand. Make a careful plan of what you need to buy before you go and stick to it. Don’t put anything in the basket or trolley that’s not on the list and you’ll save.
- Try implementing the 50/30/20 rule. From your after-tax salary, allocate 50 percent to essentials (housing, transportation, utilities and groceries); 30 percent to financial planning (retirement, savings, risk cover and debt) and 20% to lifestyle (travel and entertainment). If you are over-indebted, the lifestyle allocation needs to reduce.
- Sometimes the decision not to spend on risk management tools such as medical, car, disability and life insurance, can put you under financial distress in the long term. No luxury purchase is worth having to face a big medical bill.
- Avoid buying a new cellphone, laptop or tablet every year, and don’t fall into the trap of having five contracts; just the add-on fees alone will cost you.
- Prevent spending your entire salary or most of it before you have put some money aside for savings. Implement a policy of “pay yourself first” which means allocating a specific amount of money every month that is paid into a savings account.
- Your friends love you when you go out and pay for everyone’s drinks, however your bank account will feel rather neglected. It is best that you examine this behaviour and work on changing it for the benefit of your finances.
- Teach your child the value of money by having chores completed in exchange for some money so that they earn and save. This way they can buy the toys that they want.
By examining your spending habits, it’s possible to have a positive impact on your finances in a rather short time. Try applying these tips for at least a month and see what a big difference you can make to your finances by making small changes every day.