Inflation Worries? Top Finance Experts Share Their Smart Saving Tips

by | Mar 19, 2024 | Life

We’re all headed towards a difficult retirement. According to the National Treasury, just 6% of South Africans have saved up enough to weather the slings of outrageous fortune (or lack thereof) lurking in the shadows of our Golden Years. Bottom line: the economy has us all on the ropes. But with the right saving tips you can go the full 10 rounds.

“It’s a problem of six inches,” says Bruce Whitfield, author of The Upside of Down: How Chaos and Uncertainty Breed Opportunity in South Africa. “That is the approximate distance between your ears. You know what you need to do because every sensible book about money boils down to that basic principle.”

That fundamental concept? Consistent saving over long periods in a world that’s equally terrifying and unpredictable. The reality is that investing in your future is no different from prepping for a marathon. “Nobody competes in an endurance event without a training programme and a buddy to keep them motivated and focused on their goal,” adds Whitfield.

Stick to a plan and take it one step at a time—that’s the only way you’ll ever see the finish line. Whitfield’s new show, The Financial Freedom Pod, sees him team up with financial advisor Warren Ingram to guide guys through the incremental changes necessary to achieve financial success. “Get a buddy, start a club, meet regularly, have robust conversations about investing and put away money consistently in good times and in bad,” he summarises. “It’s not that hard. Like fitness, it doesn’t happen without effort and commitment—but the rewards will set you free.” Pick up the pace: the easy reps on the following pages will help you max out your money mileage.

Saving Tip #1: Develop a Zen-Like Patience

Hasty decisions will undo the best-laid plans, so it’s best to zoom out from a micro level and start thinking about the big picture, says Justin Els, the Director at TVC Wealth and Health Managers. “Guys who avoid checking their stock portfolios during a recession and instead balance their risk in 10-year increments are less likely to have a knee-jerk response to daily market fluctuations.”

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After all, some of the market’s worst days are often followed by its best. A hands-off approach has proven to yield the best outcomes: in an analysis of its portfolios between 2003 and 2013, Fidelity found that its top-performing investors were those who were dead. Let that portfolio rest in peace.

Saving Tip #2: Build a Buffer

If the pandemic taught us anything it’s that having a wall between you and a financial meltdown is crucial to long-term financial success. However, as part of internal research, FNB found that less than 6% of their middle-income customers had sufficient emergency savings to weather the storm for three months if they were to lose their jobs. “Keep at least three months’ salary set aside for unexpected costs like car or home maintenance and loss of property,” cautions Ruvan J. Grobler, Head of Risk at BOVEST Wealth. “This will ensure that you won’t have to rely on your credit card to survive a crisis.”

Saving Tip #3: Prioritise Paying Off Your Debt…

The average South African is funnelling 65% of their net income towards covering debts, according to a first-quarter survey by DebtBusters. However, if you can afford it—you should be ramping up your efforts, suggests wealth advisor Francois Le Clus.

“Increasing your monthly payments to save on interest and pay off loans sooner can be a life and money saver,” he says. Think about it this way: if you’ve got a property bonded at two mil over 20 years linked to prime, you’re forking out upwards of R3.2 million to cover the total interest portion. “If you increase your monthly repayment by 10%, your total interest will be R2.2 million, and you’ll pay off that same property in just under 15 years,” adds Le Clus.

Saving Tip #4: …But Start With Your Most “Expensive” Debt First

Expensive debts are those nasty financial obligations with the highest interest rates, says Simone Sharman, the Head of Business Development at Truffle Asset Management. Typically, that’s your credit card, personal loans, student loans and clothing accounts.

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“By paying these off first, you’re reducing the overall amount of interest you pay and decreasing your overall debt,” she adds. Ideally, you want to work your way down the list from the highest interest rates to the lowest. Known as the “Avalanche Method”, the RCS group says it’s one of most mathematically effective debt reduction strategies in terms of cost, speed and efficiency. Stick with it and you can deliver a finishing blow to your debts.

Saving Tip #5: Schedule a Minimalist Weekend

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We’ve had the biggest years ever for luxury item sales, and some of the worst in terms of financial struggles. Turns out the allure of designer drip can quickly override our collective concerns about our fiscal health. However, according to a survey commissioned by Slickdeals, an estimated 74% of people experience buyer’s remorse (and weeks of resulting anxiety) after buying something online.

To steel his mind against impulse buys, Els regularly schedules a so-called “minimalist weekend”. “During these breaks, focus on decluttering, simplifying your living space and reevaluating your possessions,” he says. “This can lead to a greater appreciation for what you have and reduce the desire to spend.” 

Saving Tip #6: Do Your Budget In Reverse

Nobody likes counting the number of flat whites and pints they’re drinking every month. This sort of approach can feel suffocating and deters most people from structuring a budget to begin with, says Geo Botha, a certified financial planner. “Rather reverse budget and use the 50/30/20 rule,” he suggests. Your goal should be to set aside 50% of your budget for “must-haves”, 20% on “savings” and 30% to spend on whatever you like. Yes, even the aforementioned coffees and brewskis.

The 50/30/20 Rule Explained

This simple budgeting ratio is all you need to start racking up your savings.

50%: Needs

Can’t live without it? No, having the latest iPhone doesn’t count. These are expenses you can’t fail to meet like your electricity bill, groceries and rent, says the United Nations Federal Credit Union (UNFCU). You should include your minimum required payments on your credit cards or loans under this umbrella, too.

30%: Wants

Money isn’t just to be saved—it also needs to bring you joy. And a good third of your net income can go towards those expenses that give you a well-deserved dopamine hit. From Netflix subscriptions to limited edition kicks to drinks with your mates, consider 30% of your take-home fun fund.

20%: Savings

Ideally, you want to seal away a quarter of your income for your future. Whether it’s siphoned into a unit trust, emergency fund or set aside for a down payment on your starter home, this final category is where you’ll start to open up laps between you and that dreaded, doggedly committed inflation. According to the UNFCU, you should also lump debt repayments beyond the mandatory minimum in this category. 

Saving Tip #7: Negotiate a Better Premium

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Between your home, pet, car and life insurance, prepping for disaster can be a massive financial strain. To make matters worse, premium increases seem to rear their head routinely at the end of every year, turning this fiscal burden into a growing problem. The rule: don’t just accept these price hikes.

“Send their increase letter back to them and argue that it should be lower,” says chief investment offer at Integral Asset Management Keith McLachlan. “Most years, they’ll pare down the increase and, over time, you’ll progressively win out against inflation.” Take that one step further by forwarding your current policy to a competing insurer and asking them if they can give you better rates with the same terms.

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Either you can accept the new offer then and there, says McLachlan, or send the competing policy back to your current provider to put the onus on them to improve their original proposal. A little healthy competition never hurt anyone—especially your savings.

Saving Tip #8: Try Intermittent (Financial) Fasting

Limiting your spending windows to specific periods can cut your costs drastically, says Els. Much like you’d shrink your window for wolfing down meals to just a few hours as part of an intermittent fasting diet, applying the same rules to your budget for a given week can yield the sort of deficit that will shrink your costs.

“Whether it’s a day or a whole week, focus only on your essential bills and groceries,” he says. But just like your meal plan, you can also set aside hours for a “cheat meal”. “Designate a specific day—i.e., once each month—as your ‘splurge day’,” adds Els. “It’s your day to spend a little more on something enjoyable. This planned indulgence can help you stick to your ‘fasts’ and put a positive spin on your austere approach.”

Saving Tip #9: Don’t Just Save… Invest

“If your goal is to grow your money over the long term, never leave it in a bank account,” says Botha. He recommends looking at saving and investing like having a handful of sunflower seeds. “Saving would mean taking those seeds and stashing them away to plant on another day,” he says. “When you invest, you take those seeds and plant them immediately, giving them water and time to one day become flowers.” Or you could process your harvest to start trading sunflower oil. Either way: better margins in the long run.

Saving Tip #10: Slow Down on the Road

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“How you drive has a significant impact on your petrol consumption,” warns Els. “Sudden braking and accelerating not only wastes your supply but can also wear out your car.” According to Arrive Alive, you can net up to 25% in fuel consumption savings per year by keeping your RPMs out of the red. When fill-ups are costing South Africans around 3.71% of the average salary per year*, a gearshift in your driving habits could yield a trove of bonus Randelas best funnelled into your portfolios.

Saving Tip #11: Make Money a Family Matter

“So often, we find it awkward and uncomfortable to talk about money with our loved ones,” says Sharman. “Think of it as the unspoken ‘F’ word.” But making your fiscal sitch a family affair is a crucial part of planning for your future. Transparency, says Sharman, will ensure everyone is on the same page—including your kids.

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“As parents, it’s vital to empower our children to be financially responsible,” she adds. “By setting goals together, like saving towards a holiday or a gift for the family to enjoy, you’ll know that you’re all working towards the same objectives.” She suggests scheduling family meetings to discuss the budget and democratise decisions around spending. These sitdowns will ultimately translate into everyone being more financially responsible—“and they’ll strengthen your bonds and understanding of each other, too,” adds Sharman.

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