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Johannesburg - Robert Kiyosaki, famous for his Rich Dad Poor Dad series of motivational books, says “savers are losers”.
In a world economy where money is printed by governments and interest earned on bank savings is pretty much equal to the inflation rate - and sometimes less than the inflation rate, he is correct. But, what if saving isn’t your end-goal? What if it is a means to an end? If the saving is purpose-driven then savers can be winners.
Saving for a reason, saving with a plan in mind - now that’s powerful stuff.
5 reasons why savers are winners
1. Rainy day savings
Who knows when you may be retrenched or a family emergency will require some extra funding to take you through a tight patch? With most South Africans being heavily in debt and a pay cheque or two away from financial ruin, I advocate building up savings of about two months’ worth of living expenses.
Difficult maybe, but not impossible.
A few years ago I met a couple with four children, eight months after the father had been retrenched. He had lost his car because he couldn’t keep up with the payments. They had stopped paying for insurance and when the second car was stolen they were left without transport. The mother’s job depended on a car, so she also lost her job. The house was next to go and when I met them they were selling their furniture to buy food!
A rainy day savings fund would have carried them through a tough period and bought enough time for the father to find a new job and avoid this trauma.
2. Saving for property investment
When he said “savers are losers”, Robert Kiyosaki was criticising the practice of saving as a way of accumulating wealth. He believes in investment rather than saving and has made multiple millions by investing. His primary strategy is relatively simple. Invest with other people’s money.
Sounds odd, and maybe even immoral, so let me explain.
When he borrows money from the bank to buy a rental property, he effectively borrows money that savers have placed in the bank. Then he gets tenants to pay the bank back over a period of time. And he gets the property.
Kiyosaki is right, property investment is a great strategy for wealth creation. But unfortunately, gone are the heady days when banks granted 100% loans for property investment. Now if you want to invest, you have to save first.
The method to follow is simple:
Step 1: Get out of lifestyle debt (credit cards, retail cards, overdraft etc).
Step 2: Save for your first deposit on a small townhouse in a great area. For example, for a R500 000 townhouse or flat, you will need a 10% deposit plus the transfer costs of R17 000, totalling R67 000.
Step 3: Buy the property and install a tenant to pay back the monthly bond repayments.
A word of caution though, this is a simplification of how property investment works. I recommend that you learn the basics of buy to rent property investing before you start buying properties.
But it really is that easy! All you need is a steady job with a reasonable income and a cash deposit.
3. Saving can get you out of debt
The first step in saving is get out of lifestyle incurred debt. By lifestyle debt, I mean debt incurred in the pursuit of looking cool in front of you friends. Money borrowed to fund what you can’t afford right now is lifestyle debt and nothing stops you from saving quicker than lifestyle debt.
Lifestyle debt is a killer... it is what keeps you awake at night and can literally strangle the joy out of your life.
By the way, I don’t categorise a bond repayment on your residence as lifestyle debt because if you weren’t paying off your housing bond, you would be paying rent, in other words, somebody else’s bond!
4. Saving for that new car
Instead of paying huge amounts of interest on vehicle finance, save up for that next car and pay cash for it. And while you are about it, consider buying a good second-hand car rather than paying a premium for a brand new one.
I have heard people say “But I love the smell of a new car”. True, but that only lasts a few weeks, and then you have to pay those massive monthly car payments with your after-tax salary.
Think about it, regular car finance of a R150 000 car costs about R3 300 per month. In other words, if your tax rate is 30%, you would need to reserve the first R4 700 of your before-tax monthly salary for your car payment. Shocking, isn’t it?
5. Saving for that new holiday
Life is too short to work, work, work all the time, and family holidays are a wonderful reward for a hard year’s work. Except if you have to spend the next year catching up with the credit card expenses from your last holiday!
Save up for that next holiday, make it a family goal and a reason for not wasting money on immediate gratification.
When all is said and done, I disagree with Kiyosaki. Purposeful savers are winners in my book… every day!!
* This guest post is by Neil Vorster, a property investment coach, investment author and co-founder of Organic Growth.
- Fin24
Consider yourself a savings hero? Or just have something on your mind? Add your voice to our Savings Issue:
* Write a guest post
* Share personal story
* Ask the experts
In a world economy where money is printed by governments and interest earned on bank savings is pretty much equal to the inflation rate - and sometimes less than the inflation rate, he is correct. But, what if saving isn’t your end-goal? What if it is a means to an end? If the saving is purpose-driven then savers can be winners.
Saving for a reason, saving with a plan in mind - now that’s powerful stuff.
5 reasons why savers are winners
1. Rainy day savings
Who knows when you may be retrenched or a family emergency will require some extra funding to take you through a tight patch? With most South Africans being heavily in debt and a pay cheque or two away from financial ruin, I advocate building up savings of about two months’ worth of living expenses.
Difficult maybe, but not impossible.
A few years ago I met a couple with four children, eight months after the father had been retrenched. He had lost his car because he couldn’t keep up with the payments. They had stopped paying for insurance and when the second car was stolen they were left without transport. The mother’s job depended on a car, so she also lost her job. The house was next to go and when I met them they were selling their furniture to buy food!
A rainy day savings fund would have carried them through a tough period and bought enough time for the father to find a new job and avoid this trauma.
2. Saving for property investment
When he said “savers are losers”, Robert Kiyosaki was criticising the practice of saving as a way of accumulating wealth. He believes in investment rather than saving and has made multiple millions by investing. His primary strategy is relatively simple. Invest with other people’s money.
Sounds odd, and maybe even immoral, so let me explain.
When he borrows money from the bank to buy a rental property, he effectively borrows money that savers have placed in the bank. Then he gets tenants to pay the bank back over a period of time. And he gets the property.
Kiyosaki is right, property investment is a great strategy for wealth creation. But unfortunately, gone are the heady days when banks granted 100% loans for property investment. Now if you want to invest, you have to save first.
The method to follow is simple:
Step 1: Get out of lifestyle debt (credit cards, retail cards, overdraft etc).
Step 2: Save for your first deposit on a small townhouse in a great area. For example, for a R500 000 townhouse or flat, you will need a 10% deposit plus the transfer costs of R17 000, totalling R67 000.
Step 3: Buy the property and install a tenant to pay back the monthly bond repayments.
A word of caution though, this is a simplification of how property investment works. I recommend that you learn the basics of buy to rent property investing before you start buying properties.
But it really is that easy! All you need is a steady job with a reasonable income and a cash deposit.
3. Saving can get you out of debt
The first step in saving is get out of lifestyle incurred debt. By lifestyle debt, I mean debt incurred in the pursuit of looking cool in front of you friends. Money borrowed to fund what you can’t afford right now is lifestyle debt and nothing stops you from saving quicker than lifestyle debt.
Lifestyle debt is a killer... it is what keeps you awake at night and can literally strangle the joy out of your life.
By the way, I don’t categorise a bond repayment on your residence as lifestyle debt because if you weren’t paying off your housing bond, you would be paying rent, in other words, somebody else’s bond!
4. Saving for that new car
Instead of paying huge amounts of interest on vehicle finance, save up for that next car and pay cash for it. And while you are about it, consider buying a good second-hand car rather than paying a premium for a brand new one.
I have heard people say “But I love the smell of a new car”. True, but that only lasts a few weeks, and then you have to pay those massive monthly car payments with your after-tax salary.
Think about it, regular car finance of a R150 000 car costs about R3 300 per month. In other words, if your tax rate is 30%, you would need to reserve the first R4 700 of your before-tax monthly salary for your car payment. Shocking, isn’t it?
5. Saving for that new holiday
Life is too short to work, work, work all the time, and family holidays are a wonderful reward for a hard year’s work. Except if you have to spend the next year catching up with the credit card expenses from your last holiday!
Save up for that next holiday, make it a family goal and a reason for not wasting money on immediate gratification.
When all is said and done, I disagree with Kiyosaki. Purposeful savers are winners in my book… every day!!
* This guest post is by Neil Vorster, a property investment coach, investment author and co-founder of Organic Growth.
- Fin24
Consider yourself a savings hero? Or just have something on your mind? Add your voice to our Savings Issue:
* Write a guest post
* Share personal story
* Ask the experts
