Savings start small
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.