10 New Year’s resolutions that could save you thousands
Christmas is just around the corner, and following just a week later is New Year’s. This year rather than making the same old resolutions that you make year-in and year-out that never seem to make it through the year, try something different, that will also save you money.
This week Moneybags journalist Jessica Anne Wood looks at ten New Year’s resolutions that could save you thousands.
Roland Pascal van Alphen, regional head of The Wealth Corporation, says: “Markets dislike uncertainty. Given the troubled times facing South Africa, Europe and the middle-East at present – and for the foreseeable future – there is certainly enough uncertainty to go around meaning that 2016 is set to be a challenging year.”
Recent volatility in the markets following the replacement of Nhlanhla Nene as finance minister by relatively unknown Member of Parliament David Van Rooyen, and only a few days later, the replacement of Van Rooyen by previous minister of finance Pravin Gordhan, has left investors reeling and the rand dropping to an all-time low against the Dollar and the Pound.
Despite the slight market turnaround that followed the announcement that Gordhan would be minister of finance, the country is in for tough times ahead.
In such times, van Alphen notes that the adage of “a penny saved is a penny earned” could not be more pertinent.
Below are ten New Year’s resolutions that you could make this year that could end up saving you thousands.
- Pay off your debt:
While this could end up costing you in the short term, in the long term you will be saving money, as you not only save on your monthly repayments, but on the interest you are charged too.
“It is important that you pay off your debt as quickly as possible. Credit card debt usually incurs the highest interest rates and so you should prioritise paying off this debt first. The interest charged on car repayments is traditionally higher than that charged on home loans and for this reason it is a good idea to pay off your car more quickly than paying off your home,” explains van Alphen.
- But don’t pay it off too quickly:
While paying off your debt is a good thing, you shouldn’t spend your entire salary on your debt. You require money to cover living expenses, and you should also put a little away each month into an emergency savings account to help cover any unforeseen expenses that may crop up, saving you the need to possibly take out a loan, which can cost you in monthly repayments and interest.
“Before you attempt to pay off your car or your home in record time, ensure that you have emergency savings in place lest unforeseen events threaten your financial stability. Retrenchment and unanticipated medical bills can force you into a position where you need to take out loans with high interest rates to cover these costs. With an emergency savings account in place, you can become your own “bank” and earn interest as opposed to paying it to another institution. This is an important safety net to avoiding future debt or being a forced seller of long term assets,” highlights van Alphen.
- Don’t make more debt:
Bhavesh Naran, marketing assistant at Intelligent Debt Management Group, notes that in addition to paying off your debt, you should also avoid taking on new debt. Avoid using your credit card or taking out loans. “If you are really serious about cutting your debt to size, you need to get serious about staying in control of your spending now more than ever.”
- Live within your means:
It is easy to purchase things that you want on credit when you cannot afford them. But it is vital that you live within your means. Especially during that tough and uncertain economic times. Van Alphen notes: “The choice between spending on nice-to-haves now and saving for need-to-haves later is one which should not be taken as lightly as we do.”
By living within your means, you can save money on the repayments for the lavish purchases you make that you cannot afford. Those items you covet so much will mean all the more to you if you save up until you can afford to purchase it in cash.
- Pay your accounts early:
When it comes to your accounts, Naran advises that you try to pay them off earlier than the payment date. “You’ll be happy to know that the earlier you pay, the more you will save. Most banks offer interest free credit if it’s paid before a certain time,” says Naran.
- Don’t buy new:
We all want new things, but it isn’t always necessary. “Society is preoccupied with “new” and “next” to the point where buying second hand can be frowned upon. The fact is that buying second hand can save you a significant amount over the course of your life and this is particularly true when it comes to costly, depreciating assets such as cars,” points out van Alphen.
When you purchase items new, such as the latest model car, it is important that you consider not only the cost of the monthly repayments, but the interest rates that you will be charged over the repayment period as well. “It is important that you know exactly what you are paying in total and that you are comfortable with that figure,” says van Alphen.
One thing to note when buying items such as a car is that, the value of a car depreciates the moment that you drive it off the showroom floor, whoever, your monthly repayments and the interest charged on the vehicle do not decrease with the value of the car, meaning that by the end, you have paid more than the car you are driving isreally worth. By purchasing second hand, you can save money on the monthly repayments and interest charges that come with purchasing a new car.
- Monitor your food bill:
Food wastage can cost you money, maybe not in the short term, but if you add up the value of all the food you throw away during the course of a year it adds up. Not only this, but overspending on food is another area where you can tighten your belt and cut back on your budget.
“Overspending on food is one of the quickest and easiest ways to blow your budget. You would be shocked to see what all those restaurant outings, convenient, pre-cooked meals and take away cappuccinos add up to! If you eat out only on special occasions (as opposed to every weekend) and ensure that you buy only what you need while grocery shopping, you will be amazed at the amount you save,” stresses van Alphen.
- Don’t defer investing:
Most people know the importance of saving for retirement from a young age, preferably from the moment that you start working. However, many do not do this, and the cost of not starting young can be high, as you can never make up the amount that you do not invest.
While there are other costs that are important, and often more pressing for many people, such as saving for a deposit on a home, paying off your student loans or saving for your child’s education, this should not come at the cost of your retirement
“Our society disproportionately emphasises spending on items and experiences that deliver very little – if any – long-term value. Investing is a serious commitment and it is essential that you maintain a long-term view in order to save consistently, and spend and invest wisely,” says van Alphen.
If you cut back on your retirement savings or only start saving later in life, this could have a negative financial impact on your life when it comes time to retire and you cannot afford to stop working as your retirement savings are not enough to support you in your retirement.
Naran agrees that saving is important, but not only for retirement, saving in general is vital. “By opening a savings account, you can deposit a small amount of money every month. By the end of the year, you would have saved up a nice little something that you wouldn’t normally have had. The money can then be used for anything you wish and the best part is that it does not affect your monthly budget.”
- Find a financial advisor:
Financial advice is not the preserve of the rich but something everyone should take advantage of.
For any matter relating to your finances and your financial wellness, it is important to speak to a qualified person in the field. In other words, you should seek the advice of a qualified financial advisor. “Even if you feel you do not have a substantial amount to invest, the right advice can save you a significant sum in helping you to avoid costly mistakes,” reveals van Alphen.
- Set appropriate financial goals:
“When crafting your financial resolutions for 2016, set some time aside to consider your financial goals for the year and put together a budget to achieve them. This can be as simple or as complex as you see fit. If it is your first budget, don’t worry too much about accounting for every cent. Even just defining your broad goals for the year and monitoring your progress against this benchmark can be very helpful. At the end of the day, it is your discipline rather than your detailed plan that will be the key determinant of your success,” states van Alphen.
One of your financial resolutions for 2016 should be to create a monthly spending budget and to stick to it. By knowing where your money is going every month, you will be able to better manage your spending and know what you can and cannot afford. “Discipline is key to this exercise, but if done correctly, can be financially rewarding,” says Naran.
Other money saving tips to keep in mind
There are numerous other things that you can do in the New Year that can help you to cut back your spending and save you money. For example, Naran suggests using coupons when you go shopping, even if you only save R1.00 on an item, it adds up.
There are other places you can save money too, for example on your monthly magazine subscriptions. Do you really need to get the latest copy of your favourite magazine each month?
Unless you actually read the magazine and it does not simply clutter the coffee table for a month then it might be something that you want to keep subscribing to, but if you are looking for ways to cut back on your spending, this should be one of the things to go.
“Monthly subscriptions can be costly even when you are utilising it to the fullest. You can easily save yourself almost R1000 every month by just cancelling subscriptions that you hardly even use. Trust me, you won’t even miss it,” notes Naran.
When it comes to other spending that you can plan for, such as purchasing new stationary for the new school year, plan ahead and purchase these items earlier. You could get these at a discounted price than if you wait for the new school year to purchase them, and you also avoid the mad dash as parents rush to get everything their kids need before schools go back.
“By focusing on your finances, you will find several ways to save a significant amount of money during 2016. Make these lifetime habit and you will be able to retire in comfort,” adds van Alphen.