Looking after the rands and cents
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By Kutlwano Mogatusi
“If you look after the cents, the rands will look after themselves.”
If you are familiar with this saying, you probably understand its meaning to be that if you take care not to waste small amounts of money, it will accumulate capital and grow in value.
We probably don’t need reminding of this truth but, after almost 18 months of Covid-19 inflicted lockdowns at varying levels of severity, saving even the cents is proving to be particularly difficult for many of us at this time. A shrinking economy, company closures, job losses and retrenchments are a harsh reality in South Africa today so, while we know the importance of saving, we also need to acknowledge the current circumstances in which many people find themselves.
July is recognised as National Savings Month in South Africa. While encouraging everyone to save regularly, it presents a good opportunity to interrogate personal savings goals in line with the household budget. This task needs to be done honestly and realistically, while taking into account the monthly income and expenses, what unexpected costs could arise, and the medium- to long-term financial plans.
Whether you can save a bit each month, put some funds into an investment account or need to pay off your debts will depend on your personal situation. It helps to look at a comparison of all three scenarios to determine how best you should distribute your income, remembering the importance of building an emergency fund and talking your debt to better your finances. Only then should you start building your wealth through investments.
The current reality for some is that repaying high-interest unsecured debt such as personal loans is now a permanent line item on the monthly budget plan. Despite the current low interest rates, servicing debt is regarded as expensive money due to the high interest rates charged against the loan. Prioritise your debts if you have any and aim to pay off the highest debt amounts first.
In the event that you have loans, the sooner you can pay them off, the better. This will also free up some money that you could then invest, enabling your money to earn interest and grow.
Once debts have been settled, it is advisable to speak to a financial adviser before embarking on your saving and investing journey. This will help to inform your choice of savings plan that fits within your budget and is best suited to achieve your various financial goals.
While most South Africans may want to save to further their education or for their retirement, to start a new business, or to build or buy a home, an overstretched budget makes this a difficult task. For those who have been in a position to make regular monthly savings, the financial burden resulting from the pandemic would have been less severe, demonstrating why saving a bit every month is so important, given the already difficult climate.
While it is best to keep your savings funds invested, it is also comforting knowing there are funds available for an emergency expense, or to put towards education, a retirement fund or a personal goal.
Even though we focus on savings during National Savings Month in July, essentially every month should be savings month. Where possible, try to make consistent savings – no matter how small the amount – a priority, and set clear and achievable goals that you can work towards. The time is now to take that first important step towards achieving a debt-free budget, gathering a savings nest-egg and becoming financially independent.
Kutlwano Mogatusi, Communication Specialist at WesBank.