The Extravagant Person’s Guide to Saving
"Cut your coffee to become a billionaire"
"If you invest R1 a day into stocks you could be wealthy!"
"Your avo toast is making your poor"
What's the point of having money if you can't spend and enjoy it? This piece is specifically for people who enjoy nice things. The people who take more pleasure from spending then pinching every penny.
Over the years I have learned how to manage my money. Financial literacy is an ongoing journey. You're constantly learning better ways of being smarter with money. It was not easy! My philosophy used to be - "if I have a small positive balance at month end, we're good". All I was trying to do was have more money at the end of the month than month at the end of my money. The only issue? I never had enough in December to spoil myself and Janu-worry creeped over into Febu-worry. So, you spend the first few months of the year playing catch-up.
Dealing with clients and their spending habits gives you excellent perspective into spending habits. Sometimes you become so emotionally connected to your own spending habits it's difficult to hold yourself accountable. The great news is you don't need to forego that cappuccino habit!
1. Aim to discount your largest purchases upfront!
You just found the perfect home; it's listed for a million bucks. The sales agent sends you the paperwork, the bank approves your loan, and you don't worry about putting down a heavy deposit. So far this sounds, perfectly normal and for many people - it is. In each of these steps there's hundreds of thousands in savings waiting to be unlocked.
Here's a quick game plan:
- Negotiate with the sales agent/ homeowner and submit an offer lower than the listed price (say 15% lower)
- Negotiate with the bank and push for a rate which is 1% lower than your quoted rate
- Pay the 10% deposit (if you're able to)
Three tweaks could result in you saving up to R600k... that's roughly 55 years of cappuccinos right there.
2. Fix the leaks - use a budget tool
Double check those debit orders and make sure they are all legitimate items. That free trial you used to download a few stock images for your presentation is now charging you $5 each month. A serial offender - those tiny amounts going off for no good reason. Insignificant little amounts are easy to miss, yet they add up. Log your inflows/ outflows the same way you log your gym routine or the distances on your weekly park run. There are many great apps to help (hardcore budget ninjas will religiously use Excel). You really don't need to obsess over every last cent. Now while we aren't encouraging Enron type accounting - it is worth having a broad idea of how much juice you have left by mid-month and can plan your strategy accordingly. There's NOTHING worse than being on a date when the waiter keeps on screaming "DECLINED!" and you insist it's the card machine's fault.
3. Check your subscriptions
Once you've done a budget, take a look at all those subscriptions you belong to. There's a number of subscriptions which overlap from a content and feature perspective. Also, worth getting the family subscriptions if your friends/ family are all using the same platform. I downgraded my mobile package on minutes and text and went the data route. I make plenty of WhatsApp calls which means I saved every month on paying for exactly what I need.
Those Spotify/ Apple Music/ YouTube Music subscriptions hit you like a thief in the night. It's definitely worth making sure you're not unintentionally paying for multi-platforms and forget to cancel one. Similarly, Showmax/ Netflix/ Amazon Prime have tons of great content - great content you will spend hours scrolling through. If you're one of the lucky people who have a "Netflix landlord" - great! If you are the landlord, it's always good to test friendships by changing the password from time to time. Any surplus savings from streamlining your digital life - direct it to your savings.
4. Kill those bank charges
Yes, your bank could be killing you (& not just your bank balance). Downgrading your bank account can save you a lot of money. I recently changed to one of the newer local banks and won't be paying any fees for the way I bank. This has saved me a lot every month. If you do have a premier or private account - there's a good chance you aren't maximizing the offering to the fullest. If you decide to keep a more expensive package, it's worth knowing exactly how the benefits work and where you can really leverage these. This could be savings on your fuel, cash rewards back or discounted purchases at certain retailers. Use them - you pay for it. Once again, this saving can be moved to your savings account for the end of the year. Beware the "black card" hype - not all banks are created equal in their premium service offerings.
5. Check your short-term cover
Speak to your broker and update your policy schedule. Your vehicles and other assets have likely decreased in value. Furthermore, the short-term game is very competitive and if you have no (or little) claims you can save yourself some money. Take a few minutes and use a compare tool to compare quotes. It's worth thinking about using a strong insurance broker who will do the work for you. Sure you pay them for their efforts but it could end up saving you considerably more in the long run. Yes, I am going to say it again, "move these savings to your savings account for the end of the year!"
6. Play the "do I need it now?" game
Impulse purchases can cripple anyone. Online shopping has really exacerbated how easy it is to stack a cart and hit checkout only to end up with 84 boxes and massive regret the next day. This doesn't mean you should deny yourself luxury items or not practice self-care - it's the opposite. Preserving your mental health, energy and financial position by taking care of your urgent needs first is the epitome of self-care. The ability to distinguish between "need" and "nice to have" will save you plenty of money in the long run. If there's a special purchase you want to indulge in, saving it until the end of the month also acts as a great incentive for you to remain disciplined until then. Most people punish themselves for overspending - reward yourself for spending less instead.
7. Shop for groceries when you are full
This is more a life hack than anything else. Your trolley looks completely different when you're starving than when you're full. My wife is a dietician and she told me this tip, especially when I came home with 3 bottles of Nutella that were on sale (they were not on sale, but that's what I told her and myself). Your budget and your belly will thank me later. While we are at it, a discount does not equate to a smart purchase. This is where the line starts to blur into Extreme Couponing. Just because you can save 80 cents on Coco Pops, doesn't mean taking 84 boxes home is a great idea. Then there's the storage issue of stockpiling (a nightmare if you're a minimalist). Discounts have a way of persuading people to buy items they don't really need. Now you have a pool filter that was 80% off. Wait, you don't have a pool.
8. Ask to be taxed more
Wait. What? Is this man certifiably insane? An undercover SARS operative? Okay, hear me out...
This is a strange one. If you're lucky enough to receive a 13th cheque, then ask your HR/Payroll to take a slightly higher amount in tax every month which preserves the final payout of your 13th cheque. A tax stokvel if you think about it.
9. Pay your kids schooling over 10/11 months instead of the entire year
This became a game changer for me! Making slightly higher payments per month gave me the freedom of no school fees in December. I have used this money for gifts and stationery (yes, this is a real thing you have to buy for your kids). Sometimes you have to feed them as well. Not being guaranteed a 13th cheque means you need to be creative. It is short-term pain with short-term gain!
10. Visualize your goal
No, this is not a "Rich dad, Poor dad" approach to your savings. Your current bank account is not a savings account. Yes, you will spend it and no, you will not replenish it. Your savings account is a separate account. The only thing better than having spare cash is having spare cash that grows. A great way to stay disciplined is to have a standing debit order that goes into your favourite set of ETFs (or stocks) each month. Time in the market has been proven to outperform timing the market.
"Please provide some tips for us frugal people"
- Pack lunch! This is a game changer as you won't believe how much we spend on food when working. Another trick is to buy snacks and keep them for when you are peckish. Save the money you would have spent on snacks or lunch in your savings account.
- Consider generic medication where you can. Much cheaper and save the difference in your savings account.
- Sell unwanted stuff around your house and move that to your savings account. No, Gumtree doesn't allow you to put kids up for sale. I know, it's ridiculous.
- When COVID is over, try carpool with a co-worker. This worked for me when I started my career. I caught a lift for the first 18 months and saved the difference a car, petrol and insurance would have cost me. Make sure the co-worker has a driver's license (& not just a TV license).
- Keep your car a year longer and save the difference.
- Consider sharing an apartment and save what you would have spent by living alone.
- Buy a cheap second hand guitar and sing Taylor Swift songs at a busy intersection
- Only stock up on food every time Arsenal wins - you will save a ton of cash (or possibly die)
You deserve good things & don't need to suffer in the pursuit of getting them. Focus on the easy savings and the rest will fall into place. You got this!