There are two parts to being a good saver. The first part is being a practical conscience spender; the second about being focused on your long-term goals, says Old Mutual. At first glance, saying that being a good saver depends on being an effective spender may not make much sense. Still, the two actions are tied together and apply to everyday outlays as well as paying out money on what may look like being good ways of making additional money, says John Manyike, Head of Financial Education at Old Mutual.
"Being a sensible spender means budgeting, knowing how much money comes in, where the money goes and what you are getting in return. You must understand your strengths and weaknesses and know when to turn away from something that may have a personal appeal to you."
These points are made in the latest Old Mutual sponsored AMPD Masterclass series in which entertainment personalities discuss their careers, dealings with money and the lessons they have learned. In the newest Masterclass, released on YouTube on November 18, it is rapper and songwriter, Kwesta who says that the only way to have money is to keep money.
"I have tried investing many times and have failed many times. I have put money on things and lost it and even needed to spend more money to get out of things that I have spent money on."
"I now know my weaknesses. I know that it is better for me to have someone I trust helping to grow my money and invest it. You need people who can do that, and I am just not that person," says Kwesta.
"Kwesta’s views stress that the saying that ‘it’s no use throwing good money after bad’ is something to take to heart. It doesn’t make sense to spend more money to try and improve a losing position or get out of a bad investment,"says Manyike.
"When spending to make a profit, never follow your gut feel. It is best to slow down, do some research and then get expert input before putting hard-earned cash in a project. Friendship should also never be a deciding factor when investing."
Other points made in the Masterclass are:
- Having a professional adviser does not mean that you do not have to pay attention to your spending habits. "You must understand at all times how much money comes in and how much money comes out and where the money is going as well the relationship between these three things,"says Manyike. This means:
- Knowing your adviser’s track record in terms of their accreditation, in other words, are they authorised to give you advice by the relevant a authority and having at least two review meetings a year to check on your overall financial plan and make the necessary adjustments based on your life stage.
- Having an investment plan that you understand and support. Your plan should consider short, medium, and long-term targets so that you have investments that cover all the stages of your life. Your financial advisor can assist you in this regard.
- Understanding that overspending on holiday can result in money problems later in the year.
"Budgeting for a holiday makes for happy times," says Manyike, who suggested that:
- Money is set aside for a holiday, but that daily limits are placed on spending so that adults and kids do not spend more than they should.
- Kids learn about using their money correctly. This can be done by telling them that if they do not spend all their daily allowance at once, the money they save could be used for another treat during the holiday. For example, saving money every day could mean being able to take in a movie later in the week.
- Never losing sight of the fact that there are always bills to be paid.
"Spending more than you should on holiday could mean not having enough money to pay bills at the end of January and paying for normal expenses could then become challenging for the rest of the year. It is better to cut back on spending and take a cheaper holiday so that a new year does not begin with you looking for a loan so you can make ends meet," says Manyike.
"Being a responsible and intelligent spender should also be part of making New Year Resolutions. If you prioritize needs than wants during the year, you will find that money is available for that year-end holiday."