• ETF Enthusiast

That Lightbulb Moment

The most important and first step to saving money is just to start. No matter how ineffective or useless you think putting away that extra hundred rand is going to be, what matters is you need to start developing the habit. Dr Maxwell Maltz a plastic surgeon in the 1950’s observed that it takes around 21 days to develop a habit. I really doubt this is the case with developing a savings habit especially since for most people it is such an emotional one. It can take many months for this habit to start being ingrained into you. Slip ups are common especially if you put yourself in the wrong situation – a little like giving up smoking.

In the middle of the year 2015 I started to question myself – is it really good enough to only be contributing just over 10% of my monthly salary that I never even see to my employee pension fund and a small extra amount to a retirement annuity or a unit trust. What makes me feel that when I have extra money sitting in my bank account it means that that money is available for spending? Why can’t I rather try to save as much of my money as possible every month? I knew this would have been the smartest thing to do, but throughout my youth it just didn’t feel urgent or important enough to be doing it, I have my whole working life ahead of me right?

So I decided to challenge myself to save as much of my income every month as possible. Once the challenge was set it drove something in me and I started to religiously track every cent that was leaving my bank account, even banking fees. When you think of a budget you think of an allowance dedicated for each aspect of your spending – this is not what I did. I just tracked everything in the month I spent money on. This process drastically but naturally changed my behaviour to spending, because after a few days I could clearly see what I was wasting money on, and if my priority is to be saving as much of my income as possible I clearly need to be more critical in what needs to stay and what needs to go. I considerably cut down my spending especially on restaurants and clothing.

Within a few months I cancelled:

  1. My vitality and gym memberships because I can go exercise for free outdoors, and I wasn’t buying enough healthy groceries to get close to R250 back each month – R500pm

  2. My discovery miles membership because I don’t want to have to be incentivised to spend money to make use of something – R31pm

  3. A discovery motor card, because it didn’t provide me with many real benefits – R20pm

  4. A cycling club membership I had never used and only signed up for because it is compulsory to be a part of a club for the Cape Town Cycle Tour – R35pm

  5. My blog with WordPress because they charge R200 a month for a package that allows a custom domain name and with blogger it is free – R200pm

  6. 3 tiny debit orders to various Coronation unit trusts because each debit order costs close to R4 and that is just eating away at my investment piece by piece – R12pm

  7. An account with an online investment company who charged a minimum monthly service fee to invest with them – R80pm

These quick savings total R878pm that I was wasting every month that can now be used to save and invest. I also made some changes that could end up saving me hundreds of thousands in the long term:

  1. My Coronation unit trusts because I am paying them for something I can and want to do myself

  2. Contributions to a retirement annuity with a company costing me 3.5% in fees every year

19 months later and I am still going strong, what is amazing is that I haven’t needed to drastically alter my lifestyle at all. It not like I have needed to live off two minute noodles and bread in order to save money. I live a pretty awesome life, eat good food and have loads of very fun experiences; it is simply just a mind shift that has happened.

I think many people can apply these same principles to their life and it will cause a big impact straight away. My biggest goal is to save around 33%-50% of my income every year (hopefully even more in the long-term). I managed 46% last year however this was with very low living costs since I was still staying in my mother’s flat. I now have my own flat and bond to pay so if I want to continue this I will need to increase my income, or control my expenses even more. Both of which I am confident I can do.

ETF Enthusiast

Use your money to build assets which generate more income than you require to live