How to save money from your salary

To ensure you stick to your savings goals and remain consistent about saving, you first need to understand why you should save. There are several reasons to save, but we thought we’d narrow it down and look at two of the most important. 

Two very real reasons you need to save:

1. An emergency hits and you don’t have any money to pay for it

At some point, life happens to all of us. The car needs new brake pads, your geyser bursts and the insurance doesn’t cover all costs, you lose your job. All of these things are very real and could happen to any of us. In fact, you know the expression, “it never rains but it pours”? Well, that’s how it usually happens, right? It’s as if there’s one crisis after the other, and you barely have time to come up for air. 

Then there’s all the fuel and interest rate hikes too. You wouldn’t be alone if you were thinking that life right now, seems like an emergency. 

What is an emergency fund?

An emergency fund is money that you save with the intention of it being used if (when) emergencies arise. 

When these life emergencies do arise-and they will- you need an emergency fund to “soften the blow”. What usually happens when an emergency arises and you don’t have savings to cover it? You look at using credit. This could be with your credit card or applying for a personal loan. The problem with this is: you’re using debt to finance your life and you will likely end up paying more because of the interest on your credit card or loan. This could lead to a vicious debt cycle where you’re always looking to credit to keep with life, and eventually, you don’t have any money to pay off that debt. 

The reality is you need an emergency fund. The reason? You cannot afford to live without one. 

Read this article about how you can get started with saving towards an emergency fund. 

2. You have goals that require money 

What does traveling abroad, throwing a big birthday party, and sending your children to university all have in common? They all require money. And, for most of us, more money that we can simply access from our salary. Part of having a ‘why’ is understanding what your goals are and how you want to use the money you’re saving. If you understand that you really want to do Summer in Europe, you are more likely to consistently contribute to your savings than if you were saving just because you thought it was a good idea. 

How can you get started and what is the ‘right’ way to save

There’s a lot of information out there about saving, and there’s certainly no shortage of savings account options. In fact, chances are, the bank you’re with probably has more than one savings account option. Trying to choose the best savings account can already be overwhelming, and then there’s the added pressure of deciding what the right amount should be too. This is a lot. 

And, realistically, for some (many) of us, the thought of saving seems like a pipe dream because we’re already struggling to make it to the end of the month. You might be thinking: people with money can save. I don’t have money, I’m just trying to survive. And, while there may be an idea of how much I should save, how much can I really afford to save? 

Tips to start saving

        1. Set SMART savings goals

Remembering your 'why' will be what motivates you to stay consistent. Take some time to ask yourself what your savings goals are. Is it an emergency fund? If you’re just starting out, we recommend starting with this. Do you want to travel to Europe? First uncover what your savings goals are and then get really specific about them.

For example, if you are saving towards an emergency fund, you need to establish the following:

1. S: How much do I want to save?
2. M: How can I measure if I’m being successful? How much do I have to save each month to achieve my savings goal?
3. A: Is this savings plan achievable? Is it realistic for me to assume that I can save R25 per month or do I simply not have the money to do so?
4. R: Again, how realistic is this goal? It’s great that you want to have a luxurious holiday in December, but we’re already in November, and you currently have R0 saved. Is this a realistic goal?
5. T: How long will it take me to achieve my goal? 

It’s important that when you’re setting your savings goals, you get as clear as you can about them. Remember, ambiguous goals lead to ambiguous results. The clearer you are, the better your chances at achieving them.

Why not fast track your goal-setting process with our Savings Plan. When you sign up for our Savings Solution, you can create your own savings goals. At Meerkat, we understand that we’re all unique, we all have different goals, and we’re all at different stages of our lives. 

Because of this—and with your permission of course—we’ll pull together your financial records and create a tailor-made savings plan based on your unique financial situation. You’ll then get a realistic view of:

• How much you would need to save per month
• How long it would take you to achieve your goal

         2.  Forget about the correct percentage, create a habit of saving instead

The correct way to save is not so much about the right amount as it is about the habit you create. The idea that: if you manage what you have now, you’ll be able to better manage when you have more. Can you manage to put away R25 a month for now? Whatever amount you can afford to put aside you should. This is the beginning of creating a savings habit. When the motivation runs dry what will keep you in the race are the habits you’ve created. 

        3. Keep track of your spending habits

This is a tough one and we've all been there. A few days have gone by since being paid and we just have no idea where all our money went to. Because of this, it’s really important to track your spending habits. Sometimes we don’t even know what’s costing us money. 

Here’s a challenge: print your bank statements for the last two months and see where your money is going. You might be surprised. 

        4. Create a budget

Ah, we know. The dreaded B word. Here’s the thing, keeping your head buried in the sand will not create more money or make your debt disappear. But, do you know what? You’ve faced scary things in the past. You can do this. Having an honest look at your income, your expenses, and creating a budget based on this, is essential if you want to start saving. 

Moku Tip: be honest and realistic. You’re not applying for credit where you can white lie about how much you spend on groceries. How much do you really spend? And where can you realistically cut? Again, be realistic. If you know you struggle with ordering takeout, include takeout once a week into your budget.

      5.  If you can, when budgeting,  apply the 50/30/20 rule: 

• 50% of your salary: bond or rent, groceries, transportation (think all your living expenses)

• 30% of your salary: things you enjoy spending money on (think your gym membership and going out over the weekend, for example. Anything that’s considered lifestyle and entertainment.)

• 20% of your salary: debt and savings (think those credit cards, that Mr Price store card and an amount allocated for savings.)

      6. Reduce your debt

If you cannot put away R25 month towards saving, and you find yourself relying on credit to pay for essential items like groceries, chances are, you don’t have the money to save. You should, in this case, work on reducing your debt. 

• A reminder that if you find yourself in this situation:
  • 1. You aren’t alone. More than 50% of South Africans are over-indebted and can simply not afford to save. 
  • 2. This is nothing to be ashamed of. And while it may seem discouraging, there is a way out. You can work towards reducing your debt and eventually having enough money to save. 

Read this article about debt review to find out how.