SAVING is the one thing that can put you on the path to financial independence. But just like going to the gym, it's all too easy for your initial burst of enthusiasm to wane.
San-Marie Greeff, CEO of Sanlam Collective Investments, lists five simple motivations to keep you going when your resolve falters and the going gets tough.1: It's so worth it
Who wants to have to move in with their kids when they’re 70 because they can’t afford a place of their own?
Do you really want to devote 35 years or more of your life to working, only to find out you didn’t save enough for retirement? I’ve never heard anyone regretting that they saved too much.
Savings equates to opportunities and possibilities, and who wouldn’t like more of those? Whatever life sends your way, it is easier to make the choices that are right for you if the financial resources are at your disposal.
2: Don't go big on bling
You want that fabulous, to-die-for car. And if you trim your budget a bit you can just about afford it.
But then there’s the insurance and the super expensive tyres, and you want a maintenance plan of course… and before you know it, that luxury you thought you could afford has turned into a very expensive albatross around your neck.
Before going big on bling, make sure you have weighed up all the costs and that you really can afford it, even if interest rates go up. If you want to get ahead financially, you want to accumulate assets that either generate an income or grow in capital value, or both.
Things that look nice but only cost money just don’t cut it.
3: Put your money to work
You don’t slack off in your job. After all, you are ambitious and want to get ahead. So why on earth would you let your money just sit around?
Make sure it is earning an inflation-beating return by investing it wisely and with a trusted partner. You want your money to grow faster than inflation, so that your buying power grows too.
But be wary of people promising you returns that seem too good to be true – sadly, despite tighter regulation, many investors still lose out to unscrupulous companies and fly-by-night advisers.
Make sure to partner with a reputable company or institution and don't fall prey to Ponzi schemes.
4: Patience is your biggest ally
I know you’ve heard this many, many times. That’s because it’s true.
Compound interest is your friend. Start early, keep saving, and before you know it your nest egg is bigger than you thought it ever could be..
Consider two potential savers, Thabo and Tom, both students aged 20. Thabo starts saving R250 a month from age 20 by saving some of his waitering tips while still a student; he continues to save the same amount for 20 years.
Tom only makes a start at 30, having received a nice raise when changing jobs. He then starts saving R500 a month (double what Jim was saving) into the same investment at the same interest rate for the next 10 years.
When both are 40, Thabo and Tom compare nest eggs - and guess what: despite saving a smaller amount each month, Thabo’s nest egg is more than R189 000, compared to the R102 000 Tom managed to accumulate.
Starting early pays off in the long run. Believe it because it’s true. (This example assumes a flat 10% interest rate for both savers over their respective saving terms, and is purely for illustrative purposes.) 5: It's easier than you think
Financial independence doesn’t happen overnight. It requires some commitment, some persistence and planning.
But the results are more than worth the effort (if you are reading this and aren’t convinced just yet, read motivator no 1 again). If you are scared of commitment, find an easily accessible, affordable and flexible product to meet your needs, like a unit trust.
Even better, find a financial adviser you can trust to help you along the way. But whatever you do and wherever your savings journey may take you, always remember motivator no 4 and keep your eyes on the end goal.
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