July is National Savings Month, and considering the tough economic climate as well as the financial pressure consumers find themselves under, it is essential that they make saving money a top priority.
The first step to start saving money is to set savings goals for yourself.
Motlatsi Mkalala, head of main markets at Standard Bank, said: “Setting goals will make the process of saving much easier because you will know what you are saving your money towards. It will also prevent you from being tempted to spend your money unnecessarily.”
According to Janine Horn, a certified financial adviser from Momentum Financial Planning, people need to decide if they are saving towards a short-term goal like buying a car or a long-term savings goal, like retirement.
Horn said that it is essential that people use the age-old SMART approach when it comes to setting goals. SMART stands for: Specific, Measurable, Achievable, Realistic and Time-bound.
Now that you have an idea of how to set savings goals, you need take a look at your budget to see how of much money you need to put aside for savings.
If you are unsure about how much money you need to set aside for savings, you can use these three budgeting methods to figure it out:
– The 70/20/10 method where 70% of your income goes to living expenses, 20% to debt payments and 10% to savings.
– The 80/20 method where 80% of your income is for needs, wants as well as debt, and 20% is strictly allocated for savings.
– The 50/30/20 method where 50% of your salary is used for needs like rent, groceries and utilities; 30% is used for wants such as hobbies, holidays, and eating out, and 20% is allocated to savings.
Finally, it is vital that you be disciplined and stay motivated to sticking to your savings goals because it will benefit you in the long run.
IOL Business