Sav­ings start small

Sunday Observer - - NEWS -

It is not al­ways easy to start sav­ing due to debt and one should re­alise that it is pos­si­ble to adopt the cul­ture af­ter learn­ing to bud­get.

Phumzile Nh­leko- Mtetwa said, “Some peo­ple have never done it and don’t know how to start hence start­ing small re­sults in one learn­ing the 50-20-30 rule.”

Ex­plain­ing, she said the rule called for one to use 50 per cent of earn­ings on liv­ing or es­sen­tial ex­penses which in­clude car pay­ments, rent, food, cloth­ing, util­i­ties and tu­ition fees; “The 20 per cent is for fi­nan­cial goals or in­de­pen­dence which in­cludes sav­ings, in­vest­ment, debt re­duc­tion as well as credit card pay­ments whereas the re­main­ing 30 per cent is for flex­i­ble spend­ing which cov­ers wants such as en­ter­tain­ment, leisure and travel.

“You don’t need a spread­sheet to start bud­get­ing as all one needs is the abil­ity to count money,” she said.

Throw­ing a chal­lenge, she said the first step called for one to sit in a quiet place which will en­cour­age re­flec­tion and quan­tify all ex­penses for the pre­vi­ous month.

“Af­ter writ­ing out what you spend your money on, you then have to iden­tify the essen­tials from those you can live with­out,” she said. She said one had to learn to con­fine 50 per cent as max­i­mum to liv­ing ex­penses.

Af­ter iden­ti­fy­ing the non-es­sen­tial spend­ing pat­terns, she said it was then eas­ier to cut back and re­form by seek­ing cheaper al­ter­na­tives. “You might find that one spends a lot of money on take-aways for lunch whereas it would be much cheaper to carry packed meals.”

She said other cost cut­ting in­ter­ven­tions in­cluded re­duc­ing amounts spent on en­ter­tain­ment as well as re­duc­ing the bur­den of debt by pay­ing more than the re­quired amount.

“Once you re­alise how much you are spend­ing on credit cards, you will want to pay such a debt sooner and free some money which can go to­wards sav­ings,” she said adding how sav­ing about E50 per month as a start while clear­ing debt could give one E600 in twelve months with which a lot could be done.

She high­lighted that dis­ci­pline in bud­get­ing was the most im­por­tant as­pect, “At times peer pres­sure can make one tend to buy things you don’t need but it calls for you to re­alise that there will be rough and painful patches where self-re­straint will feel like de­pri­va­tion, but this should not be rea­son to give up.”

Af­ter learn­ing to stick to us­ing 50 per cent of in­come on essen­tials, she said 20 per cent could over time be saved whereas 30 per cent be re­served for flex­i­ble spend­ing which cov­ers en­ter­tain­ment and other non-es­sen­tial ex­penses.

“With dis­ci­pline, one can even in­crease the sav­ings to 30 per­cent af­ter some time,” Nh­lekoMtetwa said.

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