The Guard

The Truth On Board

Save more money

By Thabo Baxa

Recently, I learned a definition of financial freedom that completely changed how I looked at money. As someone who viewed financial freedom as having enough savings and investments to live life on my own terms, free from all financial worries.

However, this new definition struck a chord with me: financial freedom is simply having money left at the end of the month to save and invest after covering all expenses and necessary purchases. It doesn’t matter if it’s R100 or R10,000; what matters is living below your means and consistently setting aside money for the future.

This simple definition helped me reassess my spending habits and prioritize saving and investing early. If you, too, want to achieve financial freedom and take control of your financial future, here are practical tips to help you to save and grow rich.

Pay Yourself
If you’ve read personal finance books, you’ve likely come across the term “Pay Yourself First” before. But how do you actually pay yourself? It’s a simple concept with profound implications for your financial well-being. The idea is straightforward: set aside at least 10% of what you earn and keep it for yourself. If you’re a business owner, this could be under retained earnings within your business for future growth and stability.

We often work hard to earn our money only to give it to others, leaving little for ourselves. It’s time to change that. Treat your savings as a non-negotiable expense. Just as you wouldn’t skip paying your rent or utility bills, your savings deserve the same level of priority.

If you are undisciplined like I was when I started, then automate your savings. Set up automatic transfers from your salary to your savings account before spending your money on anything else. By doing so, you ensure that your savings receive their due attention before the myriad of other expenses clamour for your hard-earned cash.

Create An Emergency Fund
To avoid unexpected expenses eating away at your savings or leading you to borrow expensive credit, you need an emergency fund. But what exactly is an emergency fund? Simply put, it’s a pool of money set aside specifically to cover unforeseen expenses or financial emergencies.

The rule of thumb is to save between three to six months’ worth of living expenses. However, this can vary depending on individual circumstances. As a starting point, I recommend aiming for R10,000 for most people. This amount provides a solid foundation to weather common emergencies without derailing your financial stability.

It’s crucial to keep your emergency fund in a high-interest, easily accessible savings account. While you want the funds readily available in case of an emergency, it’s also essential to strike a balance. Keeping the money too easily accessible may tempt you to dip into it for non-urgent expenses. Therefore, consider maintaining a slight barrier to access to prevent impulse spending.

Remember, the emergency fund is strictly reserved for genuine emergencies. It’s not a pot of money to be tapped into for the latest sale or discretionary spending. By treating your emergency fund with the seriousness it deserves, you safeguard your financial well-being and gain peace of mind knowing you’re prepared for whatever life throws your way.”

Pay Off Your Bad Debts
Bad debts, like credit card balances and personal loans, hinder financial freedom by accruing high-interest payments without generating value. Escaping debt may seem like a hard task, but it’s extremely important for your financial health.

To tackle bad debts, consider strategies like the debt avalanche or snowball methods. The debt avalanche prioritizes paying off your high-interest debts first, while the snowball method starts with the smallest debt for quick wins. As you use these methods to pay off debt you will have extra money to save and invest for your future.

Whichever method you choose, consistency is key. To pay off your debt even faster allocate extra money each month to debt repayment, celebrate progress, and stay focused on the goal of becoming debt-free.

Cut Unnecessary Expenses & Avoid Impulse Purchases
One of the most effective ways to increase your savings and reach your financial goals faster is by cutting unnecessary expenses and avoiding impulse purchases. These expenses often sneak into our budgets unnoticed, draining our resources and stopping our ability to build wealth.

Start by going through your monthly expenses and identifying areas where you can trim the fat. This might include dining out less frequently, cancelling unused subscriptions, or renegotiating bills for services you no longer need. By analysing your spending habits and distinguishing between wants and needs, you can free up more money to put towards your savings and investments.

Also, it’s essential to resist the temptation of impulse purchases. The latest iPhone or brand new sneaker can wait. Before making a non-essential purchase, take a moment to consider whether it aligns with your long-term financial goals. Will this purchase bring you closer to financial freedom, or is it simply a fleeting desire?

Remember, every rand saved is a step towards financial freedom. By cutting unnecessary expenses and avoiding impulse purchases, you’ll not only boost your savings but also cultivate a healthier relationship with money, paving the way for a more secure and prosperous future.

Ask For Store Discounts
Getting discounts is a savvy savings hack that can significantly impact your budget. Here’s a simple exercise you can use when you are shopping: when you reach the checkout counter, ask for a 10% discount. While many businesses may decline your request, some will happily oblige, granting you a welcome price reduction.

I personally use this tactic every time I go shopping, and it has saved me a lot of money over time. However, the power of this tactic lies not just in the immediate savings but in honing the skill of price negotiation. By practising the art of negotiation in everyday transactions, you increase your ability to get better deals, especially when making significant purchases.

Discounts aren’t just about getting a cheaper price; it’s about maximizing the value of your hard-earned money. Whether it’s negotiating a lower price on a car or bargaining for a better rate on a service, the ability to ask for discounts empowers you to stretch your budget further and get the most bang for your buck. So don’t be shy to speak up and negotiate—it could lead to substantial savings in the long run.

Thabo Baxa.

  • Open High Interest Savings Account
  • High-interest savings accounts are financial products offered by banks and financial institutions that provide a higher interest rate compared to traditional savings accounts. These accounts are designed to help individuals grow their savings more quickly by earning a competitive interest rate on their deposits.
  • My go to high interest savings accounts are:
  • Money Market Fund: A money market fund is a type of mutual fund that invests in short-term, low-risk securities such as government bonds and certificates of deposit. These funds typically offer competitive interest rates and provide easy access to your money.
  • Fixed Deposit Accounts: Fixed deposit accounts allow you to deposit a lump sum of money for a specified period at a fixed interest rate. The interest rate is typically higher than that of regular savings accounts, and the longer the term, the higher the interest rate.
  • Unit Trust: Unit trusts are investment funds that pool money from multiple investors to invest in a diversified portfolio of assets such as stocks, bonds, and money market instruments. While unit trusts may offer higher potential returns, they also come with greater risk compared to other savings options.
  • One of my favourite high-interest savings accounts in South Africa is TymeBank GoalSave. With GoalSave, you can earn up to 11% interest on your savings, significantly higher than the interest rates offered by traditional banks. The beauty of GoalSave lies in its flexibility and simplicity. You can open multiple savings goals and allocate your funds accordingly, allowing you to earn higher interest rates on each goal.
  • Monitor & Adjust
  • It is often said, “You can’t improve what you cannot measure.” Ensure you periodically review your progress, savings goals, and investment plans. Remember that life is dynamic, and so are your financial circumstances. What may have been a sensible plan a year ago might not serve you optimally today. That’s where the beauty of monitoring and adjusting comes into play. Regularly revisiting your financial roadmap allows you to recalibrate your route, ensuring that you stay on track despite the twists and turns.
  • Remember, financial freedom is a journey, not a sprint. It’s about progress, not perfection. Be kind to yourself along the way. Enjoy the small victories, celebrate every quick win, whether it’s paying off debt, reaching your emergency fund goals, or earning interest. Therefore keep moving forward with determination and resilience. Happy savings!