South African consumers are currently under massive financial pressure.
The World Bank’s latest Global Economic Prospects report warns of a global recession as fuel prices, inflation and the cost of living have all risen sharply and things are only going to get worse before they get better.
This means many consumers might be tempted to dive into their retirement savings to make ends meet.
But it’s also one of the worst things you can do to your finances, warns Nico Berger, head of financial planning at employee benefits consultancy NMG Benefits.
“We are going through difficult times that can be even more difficult. If you use up of your savings today, your savings will be charged for your future. Now’s the time to take a look at your spending habits and learn to spend smarter than ever,” Berger said.
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He offers these money-conscious tips:
Start tracking your spending
At the end of each month, pull out your bank statement and look at each item. Calculate how much you spend on your needs and desires. After a few months of diligently uncovering your spending habits, you’ll be able to see where your “leaks” are — and once you find them, you can work to close them.
“Smarter spending can mean ordering less takeout and eating something as easy as eating at home,” Berger said.
Set your own cool-down period – and stick to it
If you want to buy something expensive, give yourself some time to think it over before proceeding with the purchase. It may sound simple, but it’s effective on shopaholics. Buying essentials doesn’t give you enough time to really assess whether you need the item or just want it.
“The compulsion to buy often leads to remorse because you didn’t do the right research. You may find a better quality product at a reduced price elsewhere,” Berger said.
Don’t reduce the amount you deposit every month
The future is unwritten. Not only should you avoid depleting your savings, but it’s also possible to try to save more. “We are in a time where saving and protecting our money is critical to our financial future,” Berger said.
Protect your pension provision when you change jobs
The Association for Savings and Investments South Africa (Assisa) says a key reason for low savings is that members tend to take their savings in cash when changing jobs. Think of your retirement savings like this: save for when you retire one day. Paying out when you change jobs only jeopardizes your financial future. You also lose compound interest, which is where you earn interest on your interest.
Challenge yourself to cut back on your luxury spending
Every person has their own weaknesses. For sports enthusiasts, it could be expensive running shoes; for fashionistas branded clothes; For an adventurous, luxurious holiday. Think about your weaknesses, challenge yourself to cut back on your spending on these items, and redirect that money to your emergency savings account, Berger advised.
Invest in a cheaper vehicle
With gas prices rising, it can be worth looking for a cheaper vehicle. This can save you a small fortune, especially if you can work from home a few days a week so you can squeeze even more of your gas money.
talk to a financial advisor
In these uncertain times, it’s a good idea to speak to your financial advisor. They are trained and qualified to support and guide you to achieve your financial goals for the future.
“A bad financial decision today can affect your entire future. If you seek advice from an accredited financial advisor, you will not make an emotional decision due to the volatility we face today,” concludes Berger.
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