I found myself thinking about this topic as we close off this year’s National Savings Month. We are always encouraged to save or invest some percentage of our salaries on a monthly basis but cost of living in South Africa these days is making it difficult for anyone to do so. The desire to save or invest is slowly but surely becoming a pipe-dream for most South Africans.
This is due to the price of basic needs such as food, electricity, petrol to name a few – going up exponentially in the past few years. Talking to some of my peers, it is not that we do not want to save however, these days it is becoming almost impossible. After paying for all the fixed expenses each month, most people are left with a bit of money to survive for the rest of the month. From my conversations with others, it seems that most of us are living from hand-to-mouth on a monthly basis and the situation is not getting any better.
According to research done by FNB mid-last year: “Most people making middling money are broke by the 6th of each month. People who make between R15,000 and a little over R40,000 per month take, on average, five days to blow the bulk of their salaries. Those with debt tend to spend most of their income paying for that. That leaves most people in the middle-income group stretching 20% of their salaries over all but the first week of every month.”
This situation doesn’t seem to be getting any better and it is discouraging a lot of people from thinking of ways to save or invest. Another study by Discovery Bank and Visa from 2019 to 2022 has shown that South Africans are increasingly spending their money on groceries, travel and eating out post-COVID. This clearly means that as tough as things are – some of us are still able to splurge on travel and eating out. If that is the case, then it means that in spite of all the financial difficulties that we are facing – those that are very disciplined can still save or invest.
About a year ago, I wrote a column about the importance of saving/investing and shared a 50/30/20 rule. I would like to re-iterate my point and encourage those that can tighten their belts to use the 50/30/20 rule which applies to both personal and business finances. This rule highlights the importance of saving up to 20% of a salary or using some of it to pay off debts; using 50% of that salary to pay fixed monthly expenses such as rent, policies, monthly groceries and then finally using 30% for our wants which include luxuries such as clothes or even going out with friends or hosting existing or potential clients in the case of SMME owners.
I know that times are tough and most people in my hometown and beyond ‘baya-gowa’ loosely translated ‘are struggling or going through a lot’ in different ways. However, I would still like to encourage all of us to find ways to save or invest – be it a small amount into a separate savings account or via Stokvels with friends or family. Every little counts! It is very important for all of us to move to a culture of saving or investing for rainy days, so that we can have a fall-back plan if and when serious problems arise in the future.