It’s important to learn how to save money
Start by cutting down on useless expenses
When most people are asked about their reasons for not saving, they usually come up with two excuses.
Either they are not earning enough or they have too many responsibilities.
When you look at the South African Reserve Bank’s Quarterly Bulletin of June 2017, it becomes easy to sympathise with those that are not saving.
The bulletin shows that household debt as a percentage of disposable income in the first quarter of this year stood at 73.2%.
This means, on average, for every R10 000 a household earns, R7 320 goes towards servicing debt, while the remaining R2 670 heads towards expenses like groceries, transport, water and lights, among other things.
Many financial planners have attributed the poor savings culture on society’s failure to teach children how to spend and save as soon as they start earning pocket money.
Eradicating the poor savings culture could lead to the economy functioning better – especially when it comes to how people run small businesses.
A large number of small enterprises have peak periods during which they generate most of their annual income, and off-peak periods.
The failure by up-and-coming entrepreneurs to save income generated during the peak periods usually results in many an enterprise not being able to meet their financial obligations, which include paying staff salaries, service providers and the landlord – all of which could lead to a business closing down.
Debtsource chief executive Frank Knight says some businesses may have generated strong sales in November and December but they are not paid until February or March.
“That plays havoc with cash flow and means that financially, you’re starting the New Year on the back foot,” he says.
“No matter how carefully you run your company, industries outside of retail often face cash flow problems at the start of the year which could be avoided with careful preparation.”
With less than six months of 2017 left to safeguard your business, he advises that you keep cash flow reserves.
Savings Institute of SA chief executive Gerald Mwandiambira says although the domestic rate of savings was poor, it was gradually showing signs of improvement.
“The improvements are largely attributable to the amendments to National Credit Act, which are making it more difficult for people to obtain credit, which means people are forced to save,” he says.
Thrive Financial Wellness managing director Frank Magwegwe says saving is a skill that requires consumers to be willing to learn and adopt new behaviours, like regularly tracking expenses to establish where the money is going.
He advises consumers to cut down on expenses by eating out less, setting up an automatic debit order, or reviewing phone and pay-TV contracts.
Failure by entrepreneurs to save income generated during peak periods … could lead to a business closing down