Most people are familiar with the song Do-Re-Me from the musical The Sound of Music.
Let's start at the very beginning
A very good place to start
When you read, you begin with A-B-C
When you sing, you begin with Do-Re-Mi
But when we must face the music of having to save, where do we start then?
I believe the beginning is a goal. A realistic goal, as I want to know I can stick to the plan.
For me it is difficult to determine which savings goal should be first, and which ones I can attempt simultaneously. That’s why a financial adviser can be such a help. They can analyse your finances, including your debt, and spot opportunities.
These are savings questions I often hear:
- How do I start saving money?
Best is to determine how much you receive every month, and what you spend your money on. Try to be meticulous: Monthly bills, groceries, petrol and spoils. Is there something to cut back on? What can be replaced by something free?
- How do I fit saving into my budget?
My colleague at Momentum Wealth, Paul Nixon, often refers to the 50/20/30 rule:
- 50% of your income is for fixed expenses, such as your rent or house, car and utilities.
- 20% is for savings.
- 30% of your income is for your variable expenses such as groceries.
He says best is to automate your savings with a debit order as soon as your pay lands in your bank account.
- How can I make saving fun? It sounds so daunting.
I like playing a mind game. Do you love Coco Gauff’s tennis? Name your education savings the “Getting as great as Coco” fund. Or name your retirement savings “The Glenfiddich Single Malt” to imagine life after sixty as one long cocktail hour. Or pick “The Marlene Dumas Painting” fund for refurbishing your home. Get creative about what tickles your fancy.
- When do I start saving for retirement? And how much is enough?
Yesterday. Otherwise, today. The earlier you start, the less pressure you’ll experience later. It sounds like an anomaly, but a little now will go much further than a lot later. What percentage you save towards your retirement is often a thumb-suck of 15%, but here, ask for professional financial advice.
- Why do people mention tax breaks as an indicator of where to save?
Many people believe a retirement annuity or fund is one of the most efficient savings vehicles because of the refund you get. The money back from government every year is the same percentage as the tax rate you usually pay. This means if you invest R1 000, you get R250 back in your pocket if your tax rate is 25%.
- Should I take risks when I save?
A financial adviser will ask you about your appetite for risk. The best investment for you is if there is a balance between the reward (the growth) and your nerves (the volatility).
- Is it possible to “enjoy” saving?
Allow yourself a break. If there is a windfall, keep 10% to splurge, if you can. If you invest the rest, great. The biggest enjoyment will be when you reach your savings goal and pay so much less because you’re not using debt.
Saving isn’t a song, I know. But once you get into it, you’ll also be able to sing “Fa, a long, long way to run.” And you will get far.