The first step is letting go of some common savings myths, says Marilize Lansdell, chief executive officer at PSG Wealth.
“Successful savers do not fall prey to these common myths that lead many of us to delay – or give up on – saving,” she says.
Myth 1: saving is about what you earn
While we all like to believe the ability to save is linked to earning more, we all know some high-earning individuals who live pay cheque to pay cheque. The reality is that saving is not so much a factor of what you earn, but a factor of the difference between what you earn and what you spend. Anyone can save, and the first step is to take a long, hard look at your expenses and see where they can be curbed.
Myth 2: saving is for retirement
Realise that you will not only need savings one day, when you retire. You could need it tomorrow (when you need to cover medical expenses out-of-pocket), next month(when the wheels on your car need to be replaced), next year (when you want to take that holiday) or three years from now (when you get retrenched). Without a safety cushion to fall back on, or a nest egg for your big-ticket items, you are far more likely to overspend and incur expensive debt.
Myth 3: the bank is your best friend
Your money should always work for you. Unless you are outpacing inflation, you are effectively losing money. In the short term, this effect is less pronounced, but in the long term it can be devastating.
Be sure to invest in a savings vehicle that matches your investment horizon. In the short term, stock markets are volatile and you could lose money. In the long term, shares and listed property are the only asset classes that beat inflation.
Myth 4: you can catch up later
Much has been written about compound interest, and it has even been called the eighth wonder of the world. Unfortunately, compound interest really needs time to work its magic.
By putting off saving until
you “can afford it”, you are losing out on one of the most power-
ful forces in the investment universe.
Myth 5: saving can wait when “life happens”
Saving should be a mindset, rather than something you do when the time is right. There will always be “good reasons” to postpone saving and we are often side-tracked along the way. Most of us blame misfortune or market corrections for our failure to arrive at the financial position we’d hoped for. But while most of us fail – South Africa’s savings rate and provision for retirement is worryingly low – there are some that succeed.
The difference is that they make saving part of their everyday life. When you achieve a savings mindset, you will find a way to save.