- November 22, 2016
- Posted by: MoneyJunction
- Category: Investment, Retirement, Savings
Make a plan
While most people appreciate the importance of a financial plan, too many put it off to the tomorrow that never comes. It is important to identify your goals and determine how best to achieve them.
Choose an independent financial planner to help you work out how much you will need to retire. If you want to sail around the world when you no longer feel like working you are going to know how much you need.
Use an automatic savings plan to make sure that you save a percentage of your pay cheque every month. This is a fab way to save because you soon forget about the payment and adjust your living expenses without thinking about it. If possible increase the amount by 10% per year, this will ensure that you beat inflation.
Cut your bond costs
Consider paying down your bond. For most people this is an effective way of saving and increasing net worth. Even R500 per month will make a difference. On a 1 Million bond an extra R500 added to the payment will reduce the interest by R177,496 and shave 2.7 years off the 20 year term. Not bad for the price of a nights out.
Nuke your clothing accounts
They are really expensive to run, you get charged the maximum rate of interest. If you can, try to pay off your credit card each month. It’s a good way of disciplining yourself to spend within your means. Keep one or two bank cards but get rid of retail cards, they are expensive and can tempt you to spend more.
Reduce your bank fees
There are many ways to reduce your bank fees. Do an audit of your accounts. Many people open an account with a bank when they leave school and stick with the pink piggy card even when they are working. Different accounts have different functionality and if you use an account the wrong way you could incur more fees. Speak to your bank consultant to get the best mix of accounts.
Make sure your insurance policies are efficient
It pays to check prices on life insurance policies periodically. Examine your life insurance needs to see whether you are paying for too much coverage. Insure your home and cars with the same insurer. You will get a price break by doing this. Shop for car insurance to try to get a lower rate.
Cut your utility costs
Install energy saver lights, in winter keep door closed and curtains drawn at night this gives the house better insulation, shower instead of bath and install a water saving head, install solar heating, and wear a jersey instead of switching on heaters. Turn down your geyser when going on holiday. There are plenty of ways to reduce costs for energy and it will make a big difference over time.
Cut the small talk
Stop and think before you make a call and keep conversations short, better still use text or wassap, it’s that easy
Give up some large expenses
If you are concerned that your retirement funds are not on track cancel your annual vacation or alternatively take a less expensive one. Let’s assume that you spend around R15, 000 on a vacation and you have 10 years left before you retire. Investing the R15, 000 at a rate of 10% will give you R40, 600 in ten years. If you go overseas every year that cost could Jump to R35, 000. Invest this and you would get R94, 700. Another way to save is to avoid changing your car every three years.
If you can follow just five of the above tips you could put thousands extra in your savings plan each year. It just takes a little planning and the discarding of a few expensive habits. Take the time to see where you can find savings and you will have a very different outcome in retirement.