National Savings Month presents a fresh opportunity to do a midyear audit of your finances to ensure you're on track to reach your savings goals - be it a holiday in December, a deposit on a car, or extra money towards your retirement savings.
If you don't have any savings goals, now is the time to set some. You can make excuses, or you can make a plan.
The notion of savings goals might seem pie in the sky if you're drowning in debt, but it shouldn't be. If you've maxed out on credit, it's essential that you put aside money each month towards an emergency fund. If you don't have cash to cover unplanned expenses, and your lines of credit aren't open, you'll find yourself in an untenable situation.
Here is a step-by-step strategy for tackling your debt:
Start with an accurate budget of your income and expenses.
Get copies of, or download from your bank site or app, bank statements for the last three months. Sort your expenses into categories - such as rent or bond repayment, groceries, transport, cell phone and internet expenses, entertainment, etc. Some banks offer online or app tools that do this for you, but you can also do it with pen and paper.
Use an average of at least the three months to analyse where you are spending your money and costs you can cut.
List all your debts and the interest you pay for each. Remember to compare the interest over the same time periods as interest can be charged weekly, bi-weekly or monthly. Then arrange your debt from most to least expensive.
Put together an action plan to pay off your most expensive debt first by paying a bit more than the minimum due each month. You may think that you have no money to do this, but look at what the interest is costing you each month and then look hard at your budget.
Imagine what you could save if you didn’t have to pay interest on your debt.
Decide what that is worth to you and trim or cut out expenses to match. You may already have had to make some spending cuts as times are tough, but with a few more or some cheaper substitutes, you can also reduce your debt to save on the interest.
The first step in your savings journey should be to build an emergency fund for those annoying extraordinary expenses that crop up regularly, whether it is a family member who needs emergency medical treatment or an appliance or car that breaks down, or a school outing for your child.
Cellphone: Consider switching service providers or swap to a package that is more appropriate to your usage requirements.
Entertainment: Cut down on eating out and entertainment.
Takeaways: If it’s become a habit to buy lunch at the corner deli or office canteen every day, pack in lunch for work.
Convenience shopping is expensive: Shop wisely with a shopping list at a supermarket once or twice a month instead of popping into a convenience store to buy bits and pieces for dinner.
Credit cards: Abusing the credit facility on your credit card can land you in serious debt. It is also more expensive in the long run because interest charges are usually high. Either spend only what you can pay off each month or keep your credit card for emergencies only and pay for goods and services with cash or a debit card only.
Insurance: Shop around for the best insurance premium - you may be surprised at how much you can save. You can usually save the most by using a single insurer for all your cover.