How to develop a culture of saving

Saving will help you amass wealth and steer clear of debt.

With the South African Savings Institute urging consumers to spend wisely this festive season, we ask Steven Braudo, CEO of Liberty Retail, how to cultivate a culture of saving – not only during the festive season but throughout the year. This is what he had to say:

Can your attitude towards money determine your wealth?
I’d like to think that your attitude mirrors your financial stability. If you have a negative attitude towards money, this will likely result in you managing your money poorly. For example: buying something because you want it, even though you can’t really afford it. And we find that debt is very common among people with this type of mindset – especially credit card debt.
However, by having a positive attitude towards money, you can ensure that your current lifestyle is comfortable and secure. Having a positive attitude towards your money will affect how much you save and spend. Having a positive attitude will also ensure that you purchase essential items first, ensuring that a reasonable amount is saved or invested. You can use whatever is left to buy the luxury or ‘nice-to-have’ items only if they can be afforded.

How would you advise people to set financial goals and stick to them?
Here are a few steps to reaching your financial goals:
• Define your goals. What do you want to achieve? For example: do you want to pay off your credit card debt, contribute to a retirement annuity, save for a down payment on a home, start your own business or even invest in the stock market?
• Write down your goals down. Once you have decided what you are working towards, write these goals down as this will help you stick to your plan. This will also allow you to go back to your goals frequently and determine how you are doing in attaining your goals.
• Prioritise your goals and set milestones. You should follow this step especially if you have many goals that you would like to accomplish. Once they are written down, prioritise them as this will be your action plan which you will need to stick to. Also set timeframes against those goals as to when you would like to achieve them.
• Be specific but realistic. When prioritising your goals, setting time-frames is extremely important. For example, if you want to save R200 000 in the next three years for a down payment on a home, stick to your savings plan to reach that goal and ensure that the monthly contributions are realistic so that you are able to attain that goal. If you are trying to get out of debt, it is advisable to start paying off the one that has the highest interest rate.
• Commit to your goals. If you have a financial plan in place to save more money and emerge from current debt, but would like to go on a holiday, it would be wise and advisable to rather pay off your debt first. Weigh the importance of each goal and commit to meeting your milestones.

How can you improve your financial situation in three steps?
1. Prioritise extra payments on maxed-out credit cards. Don’t miss payments and avoid situations of rotating debt.
2. There is power in paying yourself first. Making money – and spending it – can feel very rewarding. Opening an account that you don’t have access to (such as a 32-day call account or a money market account) can help you reach your financial goals. Remember, when saving money, ensure you have an interest-earning account. Compound interest helps you reach your goals faster.
3. If you do not know how to get out of a bad financial situation, speak to your financial adviser and have a financial needs analysis done.