Cutting out and minimising expenses

David Crossley

Here are a few tips on how to save, once you have made the decision.

Decide how much you want to save regularly

Whilst this might be an obvious statement, many people really don't know what they want to save. A good start to this would be to work out a monthly expense budget, see what funds are available once all these costs are accounted for and then decide on a monthly savings amount to be added as a budgeted expense.

In this way, it becomes a compulsory "Cost" and is much easier to manage.

Examine your expenses carefully

We all waste money in one way or another, whether it is through careless spending on things we don't need or through inefficient and expensive financial commitments. Here are some examples that you could examine and maybe reduce:

1. Cell phone contracts - these are a killer when it comes to expense. If you are due for an upgrade, rather look at ways to downgrade, even if this means that you don't acquire the fanciest handset. Would you be better off with pay-as-you-go instead of a contract? How many messages from people do we feel obliged to return immediately when we could wait to see them or phone them from a landline?

2. Entertainment costs - saving money could be as simple as cutting out one restaurant outing a month and saving three or four hundred rand as a direct result. Look at different ways of saving on entertainment budgets - invest in a movie card or chose a less expensive place to eat out.

3. Domestic costs - If you are paying Utilities, investigate a prepaid electricity metre. This allows you to buy in advance and see how much power you are using, thereby reducing total consumption. Without becoming ridiculous, involve the family in saving electricity by switching off lights and unnecessary use of electrical appliances. Installing a timer on your geyser can save you hundreds of rand a month.

4. Close all unnecessary accounts! Clothing and pharmacy accounts encourage indiscriminate spending simply because the temptation is there all the time. This can create a debt trap of monstrous proportions. If you have these sort of accounts, resolve to cut up the cards, pay them off over a period of time and then pay cash!

5. Want versus need. Whenever you buy something, ask yourself this question "Do I want it or do I need it?" If the answer is "Want" then don't buy!
   

Set up your short, medium and long-term savings goals

Short term savings are the sort of savings you will need to accumulate in order to pay for unexpected expenses such as car and appliance repairs or even appointments with a medical professional.

Medium term savings include saving for house and vehicle deposits. Ideally, you should aim at an accumulated savings amount that equals three month's salary.

Long term savings will look at the accumulation of capital for the inevitability of retirement in however many years you have left to work.

Decide for what length of time you want to save

Saving money should be something we do on a continuous basis, but there may be a need to select a savings term for a specific goal, such as a deposit on a house. This will require saving for a longer period of time than saving for something like a lounge suite. The great advantage with this sort of savings goal is that it has a specific outcome and is often easier to strive for.

Decide on a specific savings medium

Financial institutions have a number of inventive savings schemes.

Short term investment opportunities may be limited to savings accounts, which do not pay a great deal of interest, but allow you immediate access to your money.

Medium term investment opportunities include unit trust type investments, generally requiring monthly savings amounts in excess of R250.

Long term savings plans include pension, provident and retirement annuities.

The rewards of successful saving cannot be understated, especially in a country like ours where there is little or no state intervention in the form of adequate pensions and welfare benefits. The consequences of NOT saving money are nothing short of disastrous.