HEADLINE: Saving for old age – easier said than done

Entering the workforce is a lifechanging experience and for the overwhelming majority of young people, their first salary is the most significant financial encounter they will have.
Every month, hordes of young people are drawn to enjoy the luxuries their salary seems to promise with no consideration for how they will stretch their hard-earned income until the next time payday rolls by.
Reports stating the immense importance of budgeting and saving are plentiful, but still the minority of the general population follows a strict budget or save for a rainy day.

Self-discipline
Having cash in hand could make possibilities seem endless, but if you really want to skip the broke blues, self-discipline is key.
However, this is easier said than done – but not to fear, there are ways to ensure that your money doesn’t burn a hole in your pocket.
Options like a 31-day release account can be a helpful way of taming your out-of-control spending habits. Setting up a release account in such a way that a weekly spending allowance is dispensed into your account will help you to slow your spending and keep some for later.
Jamie-Lee Loss recently took up employment as an intern journalist at Namibia Media Holdings and says that saving is her first priority. “I save a portion of my salary and spend the rest gradually on small things instead of all at once on big things,” she says.
“The rule of saving 10% of your salary is very true, because it doesn’t always seem like a lot in the beginning, but it accumulates over time and it helps to have something extra,” she says.

The 50/20/20/10 rule
The 50/20/20/10 rule is said to be an improved version of the 50/30/20 rule that quickly fell into favour with financial advisors.
The original 50/30/20 rule advises that your income be divided into 50% for your needs, 30% for your wants and 20% for investing. However, the 50/20/20/10 rule adds further dimension to one’s financial potential.
The 50/20/20/10 rule suggest that your hard-earned income should rather be divided into 50% for your needs, 20% for debt repayment and savings, 20% for investment and 10% for wants.
For those who struggle to draw up a budget in the first place, the 50/20/20/10 rule may be a useful guideline upon which to base your budget.

Baby Steps
One of American financial personality Dave Ramsey’s most renowned pieces of advice goes under the name of ‘Dave Ramsey’s Baby Steps’.
The first step is to save $1000 as quickly as you can (roughly N$15 000, adjusted for inflation).
Secondly, the aim is to pay off all existing debt – many young individuals enter the workforce with study loans to pay off.
The third aim is to save a 3 – 6 month emergency fund. This fund should cover your expenses for 3 – 6 months in case of the unexpected.
After establishing an emergency fund, retirement becomes a priority. Ramsey suggests to save 15% of the household income for retirement.
Once you have accounted for old age, it’s time to think of the youngsters. Step 5 of Ramsey’s baby steps is saving for your children’s education, should you choose to have children.
The final step of these baby steps is to pay off any property you may have acquired. From here, you are free to spend and share your wealth.

As the decades go by
The youth can often detest timelines, but in financial planning, a timeline could prove useful in holding yourself accountable and ensuring that you stay on track.
Many domestic finance advisors believe that one should learn to live below your means in your 20s and become financially independent.
Your 20s are when you are meant to find out more about your credit and start developing a retirement plan.
An emergency fund, like the one discussed in Ramsey’s first step, and the acquisition of medical aid are likely to prove useful.
In the decade that follows, it is wise to draw up a will and have a month’s income saved for retirement.
In your 40s you should save three times your salary for your retirement before increasing this to five times your salary in your 50s.
By retirement age in your 60s, you are projected to have eight times your salary saved up for your old age. This is a good time to look into trusts and, if necessary, part-time employment.