Don’t shoot the messenger
When FAnews developed its website the idea was for me to write three pieces each week to ensure there were fresh ideas for our thousands of visitors. It soon became clear that writing three new articles each week was too much for your’s truly – so we cut
Why should we save? I can find countless reasons. If we consider the ‘big picture’ then a strong consumer ensures a strong economy. That’s why the South African Savings Institute (SASI) is telling everyone who cares to listen: Savings is critical to the consumers’ recovery. On a more personal level savings ensures peace of mind. In the short-term you need cash to cover unexpected expenses and possibly to supplement household income after retrenchment. Over the long-term your disciplined monthly saving strategy ensures enough capital accumulation to “buy” a comfortable retirement.
Taking a leaf from the ‘big business’ book
We can learn a lot from studying how businesses dealt with recession. Company executives realised their turnovers (salaries to you and me) would be severely dented by the economic downturn. The only way for them to rebalance their income statements – and protect bottom-line profit – was to reduce their operating expenses by roughly the same amount. The earnings improvements reported by listed companies in the second half of 2009 and early 2010 stem from aggressive steps to manage expenses. They’ve renegotiated contracts, consolidated operations by combining offices and closing regional branches, reduced inventories and, unfortunately, cut their workforces.
Consumers should learn from ‘big business’ and create their own expense management and savings strategies. SASI chief executive officer Elizabeth Lwanga-Nanziri pointed out: “Business knows it can’t live beyond its means indefinitely and has made sensible cutbacks. Hard-pressed consumers should take note. To ensure you take part in the recovery you have to budget properly and manage your income better.” This SASI plea was issued during National Savings Month, held in July this year. In our view the savings theme never gets old and we’ll repeat it month after month, until local consumers get the message!
Savings strategy requires sacrifice
We’ve spoken to plenty of individuals who would rather spend today in favour of saving for tomorrow. I guess the ‘here and now’ is always easier to deal with than a retirement event 30-years, 20-years or 10-years in the distance. But we forget how quickly time passes. Before we know it we only have five years to go, at which stage the savings requirement is simply too daunting. This is the reason SASI wants you to manage your finances as if you were a business. “Well-managed businesses today have more money on their balance sheets and have stopped spending money on projects that might not be necessary,” Lwanga-Nanziri. “Prudent consumers can do something similar!”
The economic recovery might mean you feel more secure in your job, or could result in a new job after a period of unemployment, but that doesn’t mean you should go back to your pre-recession spending habits. SASI wants South Africans to save more, pay down existing debt and spend less on frivolous items to sustain their personal recoveries. We need to get away from the shocking savings culture, illustrated by the latest statistics. South Africa’s household debt as a percentage of disposable income is at 80%, with the same group contributing a worry -0.4% to national savings.
Borrowing from the Savings Institutes’ grand plan
Savings doesn’t need to be a dour affair. SASI has a wonderful plan they hope all South Africans will implement. “The numbers seem daunting and are difficult for many people to put into an everyday context, but the lessons can be simply applied by the average family,” noted Lwanga-Nanziri. “SASI’s simple five-point savings plan makes a good starting point and could take many families on the path to recovery.” Without further ado, here’s the SASI “five point” savings strategy:
1. Have a dream. Think about the future and what you want to achieve for yourself and your family.
2. Put your dream to paper. Make a note of your goals for short, medium and long-term saving, and set realistic timeframes for each.
3. Develop a savings plan. Decide how much you need to set aside every week and month to reach your savings goals and start putting that money into appropriate savings products. You should approach your financial adviser to assist with the implementation of your plan.
4. Work on a household budget. Make sure you know where your income goes, identify areas where you can cut expenses and outgoings. Carefully study all of your expenses, prioritise them, and cut the unnecessary items.
5. Stick to your plan. Make the savings as planned and put the money away – try to make a habit of savings.
The theme of Savings Month 2010 was: Save for the Goal – the Path to Recovery. Lwanga-Nanziri said consumers who take this theme to heart will find savings life transforming, during the economic recovery and for many years after that!
Editor’s thoughts: FAnews cannot force our readers to save, but we can remind them how important it is. We plan to do so often in the coming months – until we redouble our efforts in National Savings Month 2011. Have you implemented your SASI “five point” savings plan? Add your comments below, or send them to [email protected]
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