People say life is short but that’s changing every year. Life expectancy is higher than ever before, meaning most of us will need our money to last a little longer than we might have expected. The problem is most of us are too caught up “living in the now” and not looking too far into the future. The “now” for most 30-somethings is a nice car, house and perhaps even kids – all of these things have a financial impact.
The major problem with a lack of savings in your 20s is the loss of compound interest you could have earned over those years. Compound interest is essentially the money you earn on your principle investment plus any interest added. It’s almost a double return – your initial investment grows each month, meaning your interest increases along with it. Interest upon interest!
Saving money can be a tough thing to do though. Most of us live pay cheque to pay cheque, supplementing that income with various forms of credit as we walk a tight line each month. The problem with not saving early is that it all adds up. Compound interest causes every cent you save or spend now to be worth more and more in the future.
By starting to save now you give your money the longest time possible to grow.
There are a few ways to ensure your savings get a head-start as you enter your 30’s:
After spending some time in the working world you might be inclined to start living a more lavish lifestyle. Jumping into large payments like a new car or house can leave you in debt for years to come. Try to avoid accumulating too many extra debts, meaning you have more money to put towards saving for your future
Cut The Carbs
Not to jump on the Tim Noakes bandwagon but rather to emphasize the point of cutting back on things we might not need. Budgeting and controlling finances is almost more important in your later years, especially if you have children. Those occasional financial hiccups have a greater tendency to crop up and a having some form of savings to deal with them is paramount. Cut out the unnecessary expenses and budget accordingly!
There are so many ways we can save a little each month. Checking things like bank statements, insurance policies and entertainment choices are just a few ways you can save a ton of money. Do you need the premium DSTV package or can you stream your favourite TV shows for free? Perhaps you’re overpaying on a car insurance package, especially one you got in your early 20’s?
Make Your Hobbies Pay
Many of us have certain skills or hobbies we really enjoy but not very many of us monetise them. Consider the things you do in your free time and perhaps ways you could make a little extra income from them. There is nothing better than doing what you enjoy and making a little something on side while doing so!
Plan Plan Plan
As you get older budgeting doesn’t just take the form of a monthly expense list. You need to start considering things like your Retirement Annuity, long term investments, University funds for you children and even life insurance. Plans also have a way of changing so consider each year as it comes and set out goals you wish to achieve. Contribute regularly to your RA and consider starting something like a Tax Free Savings account. Any extra money you can make now will be worth far more in the future!
Check out more of our personal finance articles