Every South African, regardless of their age, understands that the more money you have, the better your quality of life. Young income earners can create more wealth over the long-term than older people because as a young professional, you have time on your side.
However, in the current economic environment, in which everything from VAT to fuel is increasing, how do you find the funds to save and invest?
If you, like so many other South Africans, have watched the value of your money decrease in the last six months, it’s time to cut your spending and boost your savings and investments.
Five tips to squeeze extra cash out of an already-tight budget
1. Get your mind in the right space
Careful planning and consistent discipline is the cornerstone of any saving and investment plan. Even if you’re struggling to make ends meet every month, you need to set the negativity and fear aside and put a plan in place to pay down your debts as quickly as possible.
Knowledge is power. The best way to get into the right frame of mind is to understand the financial challenges you’re facing. Carefully examine your bank statements and highlight any areas in which you’ve spent too much. You may find that you’ve overspent on food, luxuries, entertainment and clothes. Come to terms with the fact that you’ll be cutting down on the extras.
2. Set specific financial goals and targets
Once you have an understanding of your earnings and spending, use this knowledge to set specific targets. Perhaps you need to supplement your retirement nest egg or save to create an emergency fund. Once you know what you’re working towards, it’s easier to maintain your focus. Monitor your progress and stay motivated.
Most importantly, fight the desire for instant gratification, stop spending money to impress others and focus on your long-term saving and investment goals.
3. Restructure your budget to reduce your monthly expenditure
The world is continually changing, and you must be able to adapt your budget to these changes. Every time the petrol price increases, look at ways to cut down on your travel spending. When rates and taxes increase, consider ways to reduce your spending on electricity or water. Revisit your budget as often as possible during the month to monitor your spending. Focus on one or two sections of your budget where you can slowly, but steadily reduce your expenditure.
Expect the unexpected. When the economy or demands from your family throw you a financial curveball, remain focused and don’t panic. Panic can cause you to make serious financial mistakes. Take every knock in your stride and do your best to regain control of your finances.
4. Speak to a financial adviser
Once you have a clear understanding of your monthly budget, speak to a financial adviser. You might be too close to your financial situation to spot new opportunities to increase your savings and investments. Professional advice is essential, so be careful not to take advice from a colleague, friend or family member with no financial planning qualifications.
Remember that this is your money and you need to use it for your personal goals. Always play open cards with your financial adviser, reveal your short-, medium- and long-term goals so that you can work together to implement a strategy that will work for you.
5. Create additional income streams
Creating multiple streams of income is a great way to increase your income and, in turn, your savings and investments. If you live on a property where there is unused space, consider renting that space out to a tenant. If this doesn’t meet your requirements, use your personal or professional experience and skills to earn extra cash on the side.
Once you find an additional income stream, the temptation to spend the extra cash might creep in. Acting on that temptation could destroy your financial plan. Stay focused on your goals, and you will undoubtedly remain on the road to financial freedom.