By Kutlwano Pooe
Since July is National Savings month we should dedicate some time to being more aware of our spending patterns .Let’s be honest, we all love to spend money rather than saving for those rainy days. Personally I am an impulsive spender with a bit of self-control. Moving to campus residence and having to feed myself has taught me to budget and use my allowance wisely (hahaha sometimes). I conducted research on ways to prepare for those rainy days. From the research, I summed up the road to savings using 3 easy steps, brace yourself ;):
Step 1: Save before you spend
Whether you use a budgeting app on your smart phone or still budgeting the old school way, your budget must PRIORITISE savings first before spending. Difficult, right?
Step 2: Distinguish between NEEDS and WANTS
Firstly let us define exactly what needs are and what wants are. Needs can be defined as goods and services that are a necessity for basic living such as food, clothes, shelter, water and health care. Wants are not necessary but are goods and services that we desire or wish for. Clothes are a need but designer clothing is not. Instead of spending tons of money needing your wants, simply withdraw from wants. Wants can obstruct you from opportunities to save.
Exercise 1: To identify your spending behaviour and whether you spend more on needs or wants, check your bank statement. From there reduce spending money on unnecessary goods and services. This will teach you self-control.
Step3: Let your assets buy your luxuries
What this means is that your yield from investments should be able to help you purchase your luxuries. How? Maybe have a reward system from your savings. After saving for a certain period of time, use a small portion to reward yourself for saving! This exercise will motivate you to save more and it restricts reckless spending behaviour.
I hope that these tips help you all save an extra coin; I will be using these tips as well. Let us know if you have managed to save money the savvy way.
‘Do not save what is left after spending, but spend what is left after saving’ – Warren Buffet