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Only six million people in South Africa belong to a retirement fund. (<a href=\http://www.shutterstock.com\>Shutterstock</a>)
Cape Town - July is savings month in South Africa and shines the spotlight on the shockingly low savings figures in our country.
And while there is no doubt it is hard to find the cash and motivation to save in the face of ballooning living costs and high debt levels, it is truly empowering to see your hard-earned money grows.
Karin Muller, head of Sanlam [JSE: SLM] Growth Markets Solutions, suggests four ways you can act smartly to set yourself on a oneway trajectory to wealth and prosperity.
Track your spending
Get into the habit of recording every cent you spend and you will soon form a much clearer picture of where your money is going.
This can take you as little five minutes a day and there are extremely good apps available online for laptops, tablets and smartphones which will help categorise your spending and identify trouble spots.
Examples are http://www.imore.com/budgt-iphone-review or http://download.cnet.com/SimpleD-Budget/3000-2057_4-10766253.html.
These apps will also help you set up a household budget which is critical for to be in control of your finances.
Common savings sappers are quick midweek pop-ins to your local coffee shop, expensive coffee, bottled water or bought lunches.
Cutting back in your trouble areas will free up money for savings which you didn’t know you had.
Don’t pay off short-term debt with long-term savings
The recent Sanlam Benchmark Survey revealed that more than half of South Africa’s pensioners are not making ends meet.
There are myriad reasons for this, but one of the biggest factors is the depleting of retirement money during work years.
In this country, when we change jobs we have two options: to reinvest the money we accumulated during our years at the previous job or to take the lump sum out.
It is often easier for the employee to take the money than to reinvest it. National Treasury is investigating different ways to address this.
What happens is that most people take the money and never end up reinvesting it.
About 46% of the people polled in the survey who withdrew their retirement savings used their retirement money to pay off short-term debt and 29% used it to cover day-to-day expenses.
These stats show clearly that South Africans are living beyond their means. Unfortunately it is impossible to ever make up the savings if you start saving again from scratch.
This is because you cannot make up for lost time and the savings loses its compounding momentum (compounding refers to generating earnings from previous earnings).
Keep on top of your retirement saving
Keeping regular tabs on whether you are on track to keep your current lifestyle after you stop working is a very smart move indeed.
Most South Africans won’t save enough for their retirement, but there is no reason you should become a statistic.
Try this simple calculation:
• After working for 5 years, you need to have saved 1 x your annual salary;
• After 10 years, 2 x annual salary;
• After 15 years, 3 x annual salary;
• After 20 years, 4 x annual salary;
• After 25 years, 6 x annual salary;
• After 30 years, 7 x annual salary;
• After 35 years, 10 x annual salary;
• After 40 years, 12 x annual salary.
Ask your retirement fund and retirement annuity provider for the current value of your retirement savings.
Work out your annual salary and how many years you have been working for and see if you are on track.
If you are not, have an urget conversation with a professional financial advisor to make a plan to increase your savings.
Save any bonuses or salary increases
Whenever you receive “ad hoc” money such as a bonus or salary increase, keep it separate from your day-to-day expenses and save as much of it as you can.
Settling debt is also a smart move to make with this money, but once this is done anything left over should be used to boost your savings outlook.
- Fin24
And while there is no doubt it is hard to find the cash and motivation to save in the face of ballooning living costs and high debt levels, it is truly empowering to see your hard-earned money grows.
Karin Muller, head of Sanlam [JSE: SLM] Growth Markets Solutions, suggests four ways you can act smartly to set yourself on a oneway trajectory to wealth and prosperity.
Track your spending
Get into the habit of recording every cent you spend and you will soon form a much clearer picture of where your money is going.
This can take you as little five minutes a day and there are extremely good apps available online for laptops, tablets and smartphones which will help categorise your spending and identify trouble spots.
Examples are http://www.imore.com/budgt-iphone-review or http://download.cnet.com/SimpleD-Budget/3000-2057_4-10766253.html.
These apps will also help you set up a household budget which is critical for to be in control of your finances.
Common savings sappers are quick midweek pop-ins to your local coffee shop, expensive coffee, bottled water or bought lunches.
Cutting back in your trouble areas will free up money for savings which you didn’t know you had.
Don’t pay off short-term debt with long-term savings
The recent Sanlam Benchmark Survey revealed that more than half of South Africa’s pensioners are not making ends meet.
There are myriad reasons for this, but one of the biggest factors is the depleting of retirement money during work years.
In this country, when we change jobs we have two options: to reinvest the money we accumulated during our years at the previous job or to take the lump sum out.
It is often easier for the employee to take the money than to reinvest it. National Treasury is investigating different ways to address this.
What happens is that most people take the money and never end up reinvesting it.
About 46% of the people polled in the survey who withdrew their retirement savings used their retirement money to pay off short-term debt and 29% used it to cover day-to-day expenses.
These stats show clearly that South Africans are living beyond their means. Unfortunately it is impossible to ever make up the savings if you start saving again from scratch.
This is because you cannot make up for lost time and the savings loses its compounding momentum (compounding refers to generating earnings from previous earnings).
Keep on top of your retirement saving
Keeping regular tabs on whether you are on track to keep your current lifestyle after you stop working is a very smart move indeed.
Most South Africans won’t save enough for their retirement, but there is no reason you should become a statistic.
Try this simple calculation:
• After working for 5 years, you need to have saved 1 x your annual salary;
• After 10 years, 2 x annual salary;
• After 15 years, 3 x annual salary;
• After 20 years, 4 x annual salary;
• After 25 years, 6 x annual salary;
• After 30 years, 7 x annual salary;
• After 35 years, 10 x annual salary;
• After 40 years, 12 x annual salary.
Ask your retirement fund and retirement annuity provider for the current value of your retirement savings.
Work out your annual salary and how many years you have been working for and see if you are on track.
If you are not, have an urget conversation with a professional financial advisor to make a plan to increase your savings.
Save any bonuses or salary increases
Whenever you receive “ad hoc” money such as a bonus or salary increase, keep it separate from your day-to-day expenses and save as much of it as you can.
Settling debt is also a smart move to make with this money, but once this is done anything left over should be used to boost your savings outlook.
- Fin24
