With the prices of fuel, food and electricity continuously rising, it seems almost impossible to have any money left over to save. Alexander Forbes Financial Planning Consultant Michelle Alberts offers her expert advice on how to save money in these tough economic times.
Set up a budget
Start by checking old bank statements to determine the cost of your monthly basic living expenses. To track whether you are being frugal enough with your money, create a list of ‘essentials’ and ‘flexible costs’ (this includes your entertainment costs and luxury buys) and list your purchases accordingly and from there decide what is really necessary. Check your budget throughout the month to ensure you stick to it.
Understand the importance of financial planning
By thinking about the big picture and where you want to be five, 10 or 30 years down the road, you can develop a financial plan that allows you to work toward those goals. Without a financial plan you are more likely to live in the moment, which undoubtedly results in poor financial choices. The steps you take today will set the pace for the rest of your life, determining your quality of life and long-term financial security.
Don’t buy everything in bulk
Sometimes it is more cost-effective to compare the price per weight ratio of food when shopping. While bulk-buying your groceries is usually cheaper, items on special often work out cheaper.
Know how much every meal costs
Every meal, whether bought or home-made has a cost. Analyse what every meal is costing you. You might just be surprised that what you thought was saving you money could actually be costing you more.
Translate rands spent into the hours you worked to earn it
Time literally is money. Each rand in your pay cheque represents some amount of time it took for you to earn it. (And it’s not just your hourly wage.) Figure out how much time a rand is actually worth to you, and you can begin to see your expenses in a whole new light. Ask yourself if that new digital camera is really worth a week at the office?
‘Before you can start saving it’s important to reduce your debt by making a list of all your debts,’ says Alberts. ‘Include the outstanding amounts and the interest rates of each debt. Pay off debts with the highest interest rate first, as this will minimise the amount of money you pay towards interest. Work out how long it will take you to pay off all the debts. Never deviate from your budget. Never miss a payment, as this will damage your credit rating and you’ll struggle to get loans in future,’ Alberts says.
