Have an Emergency fund

It’s always a good idea to have an Emegency Fund available where you can quickly access money. You never know when something is going to happen. Think of how you would cope with a car service which costs 3-times what you expected, or if you needed to be admitted to hospital but your medical insurance requires you to pay upfront. Perhaps your washing machine suddenly stops working, or a power failure causes everything in your freezer to go bad. You could even have your credit card blocked and be in a difficult spot for a few days.

It’s just useful knowing that you have something saved for that rainy day. And, it is a great stress relief knowing that you are sorted for emergencies.


How much do you need?

Circumstances are different for everyone so you need to make this decision yourself. Think about things that may have happened in the past where you suddenly needed extra money. Also think about things that could happen.

This is certainly not an exact science, rather just a ball-park figure which would make you feel comfortable and less stressed. Having something is better than nothing, so if you really can’t figure out how much to aim for, just set a low limit and see how it goes.

Type of account?

The three important factors about the account you use for this Emergency Fund are:

The purpose of an Emergency Fund is that you can access the money immediately. Anytime, day-or-night. Imagine needing to draw cash at at ATM at 2am – would you be able do so? Even if it involved using your online banking to transfer money between accounts; as long as it can be done quickly.

If you have a home loan from a bank, it could be very helpful to stash this extra cash in that account. Provided of course that the home loan account allows for withdrawals or transfers. Doing this would allow you to save interest on your debt, and this is often high. If you’re not sure contact your financial institution.

Have you considered keeping all your savings in one account and simply tracking the various goals in a spreadsheet? Have a look at how to use Savings Pockets to simplify your life.

How to start?

The best way to start anything is just to start! You don’t need to have enough money or know exactly what you’re doing before you start; just make the conscious decision. A few guidelines though would be:-

  1. Decide on your number. How much would you like to have saved in this fund?
  2. Decide which bank account to save it in – investigate the options but remember to keep your life (and admin) as simple as possible.
  3. Create a budget if you haven’t already.
  4. Set yourself a goal to save the necessary funds.

Once you have started you will see that circumstances may change, or you may need to use your fund sooner than expected. That is all fine, just relook at this often and be sure to be working towards this.

Is it better to Save or to Pay Off Debt?

Screen Shot 2017-06-17 at 1.51.16 PMIt’s easy to feel pressured to have a savings account or some type of investment. Is it better though to be saving or to be paying off debt?

Let’s have a look at some ways to calculate the answer…

Interest Rate

Generally speaking (and almost always) the interest that you earn on savings is far less than what you would pay on debt. Let’s look at an example…

You bank account may give you 4 – 6% (as an example) and fixed-term savings accounts may give you a bit more. Unit Trusts or other investments will probably be even more although they vary each month but you can get a general idea of the growth by looking at an investment summary sheet.

Debt – whether on store accounts or credit card is often charged a much higher interest rate. Add to that “fees” and penalties and all sorts of made up costs. Store accounts are designed to trick you because they often offer 3 or 6 months interest free debt, but remember that they charge you other fees each month (club fees or Special Member fees). And, if your debt is not paid within the interest-free period, they hit you with very high rates.

Thus; find out the interest that you would earn if you save your money and find the interest that you are charged (look for your account where you are charged the highest interest). That should give you your answer. Most of the time it is better to pay off debt!

Tip: If you have a home loan that you can access (pay extra into and withdraw when you need it) then you can save money by paying off your loan. If you pay extra into your loan account you will earn interest at the rate of your loan (currently in South Africa home loans are offered at around 12% interest). This is a good way to save for emergencies but at the same time you are paying off debt.

The Cost of Debt

Let’s look at a simple example of how much debt can cost you. If you have 1000 and you put in in a savings account for 1 month with an interest rate of 4.5% you would earn 3.75 interest. If you owe 1000 on a loan and the monthly interest rate is 20% you would pay 16.66 in interest.

Thus, if you “save” your 1000 for the month it is actually costing you money! You will have to pay 16.66 interest on your loan and yet you only earn 3.75 on your savings. You have to pay 12.92.

In this example, if you choose to save the extra money, it is actually costing you money and not saving at al!


Did you know that is most cases (if not all) the creditor (person or company you owe money to) can call up your debt at any time and insist that you pay it immediately. This is especially true for banks who can call up your home loan. This would put you in a terrible situation and could be disastrous to you and your family.

Debt always comes with a risk and therefore it is better to pay your debt as quickly as possible! Being in charge of your money means that you minimize risk by knowing and understanding the consequences of what you do.

Peace of Mind

Having debt causes stress. It’s not nice knowing that you owe someone money and especially if you are struggling to pay it. The consequence of not paying your debt can be dire and this all adds to your stress levels.

If you have the choice of saving 500 in your bank or paying debt off you should consider the peace of mind that you could “buy” yourself. Having no debt would be a wonderful feeling so if you can get to that state by slowly planning, budgeting and working towards being debt-free this would bring great relief to life.


It is probably a good idea to have a small amount of savings that can be used for emergencies; but generally speaking it is far better to pay off debt rather than save. If you have any spare money at the end of the month work towards paying off your debt!

Have a look at this article on paying off your store cards and apply that principle to any forms of debt that you may have.

Why Save?

This site is all about saving, budgeting and in general taking charge of your money. But saving is hard and requires you to make sacrifices. Is it really worth the effort? You might think that it’s silly to work so hard and then not spend your money; surely that’s why you work and earn money in the first place!


Well, to start with, you need to find balance as you do need to enjoy life and spend money on things that can bring you joy. You need to spend time with loved ones and have fun. There is an old saying “all work and no play makes Jack a dull boy”. We don’t want to become dull (and possibly cantankerous) simply because we focus so hard on saving that we forget how to live. To help you find this balance you definitely need to create a budget and a plan.

There is of course the concept of “living for today and enjoying each day to its fullest” but at the same time we need to look at “the bigger picture”. Saving is your tool to reach your goals and dreams. This is something that is completely in your control and the amount you save, the goals you make and the success is all up to you!

Many people feel that they simply don’t earn enough in order to reach any goals and thus don’t even bother trying. If you seriously look at what you earn and what you spend, you may find that there is actually more than you think. Unless you can find a way to earn more money, you should certainly be looking at where your money is disappearing to.

Here are some reasons why you should save (make your own list of keywords to get you started).

  • Better retirement plan
  • Less stress knowing that you have some money saved in the bank
  • A debt-free (thus stress free) life
  • Your children’s education
  • Your dream trip overseas
  • Your health (being able to afford better choices)

Why not start right away with your first goal?

Create a simple budget

If you’ve never made a budget before then you should really start with something simple. Not that you ever really have to get too complex, but as you work with a budget over time you may find things that you want to change or situations that don’t work easily with your budget.

Before starting it would be good to know how much you’re currently spending. If you don’t have a clue then take the 30 Day Challenge of keeping track of each and every expense.

I like to use a spreadsheet for my budgeting as it makes the maths easy; you can however use any tool including a notepad and pen.

Start off with your income. You should hopefully know how much you earn each month, but if not, go find your salary slip. I would use my “net salary” (the money that is actually paid into my account) as my income as there is nothing I can do about taxes and other deductions off my salary. Of course, you may have access to a company store or canteen where purchases are automatically deducted off your salary – and these expenses you have full control over. So, use your full salary less taxes less compulsory expenses that you don’t control. (You can use your gross salary and show taxes on your budget, but that depends if you want that kind of detail)

If you have any other stable income (that you can rely on) then add it in as well. Examples would be over-time that you always work, rental income or a personal loan that someone is paying back.

With the Income section completed, now it’s time for the hard work. You need to categorize your spending into categories that make sense to you. Everyone has different spending habits and there is no “one fits all” solution. Categories could be things such as:

  • Satellite TV
  • School fees
  • Loans
  • Insurance
  • Groceries
  • Eating out
  • Entertainment
  • Fuel
  • Telephone
  • Club memberships
  • Golf
  • Other (for small things that don’t fit into a category of their own)
  • etc….

Although most expenses are monthly, some may be annual expenses (e.g. club membership) or possibly even quarterly expenses. The best way to handle these is to work out the monthly amount and budget per month and save the money in a specific savings pocket so that you don’t get a shock when you need to pay the money. It’s really easy to do once you’ve set up your “system” and reminders on your phone.

The most important aim of a budget is to ensure that you earn more than you spend! If you don’t, then you have to spend less. It’s that simple, but in practice it may take a few months to change your spending habits. You may want to consider cancelling store cards as these make spending far too easy!

Basic Budget

Now that you have decided how much you can spend in each category, you must stick to the budget! You will find that you cannot control expenses exactly as you plan as things happen and we react accordingly. However, if you overspend on the Groceries category then you need to underspend somewhere else to ensure that your overall expenses do not exceed the budget.

I also like to have a category for “Other” expenses which are often unplanned things that come up.

Once you have created your budget, see if you can find any extra cash or ways to save money.


Create your budget now!

Cancel your store cards

By “store cards” I mean the type that allow you to buy on credit. They are certainly convenient as they allow you to buy things without needing actual money, and many stores offer interest-free credit for a few months and include great benefits such as:

  • insurance cover for in case you lose your job
  • monthly deals / vouchers
  • magazine and exclusive access to a website
  • competitions
  • etc

It all sounds great and it seems almost silly not to take them up on the offer. Some people even feel that paying for something interest-free over a few months makes far more financial sense as it allows you to earn interest on your money in the bank. That does make sense; but only if you are really disciplined about your purchases and you actually do the admin to ensure that you allocate the money in your bank account. It’s a small saving considering the admin and time involved.

So why are store cards bad?

1: Too easy to spend

It is far too easy to spend money on your card and unless you are incredibly self-disciplined you can very quickly spend more than what your budget allows for. That is great news for the store but terrible for you as you still have to pay it back! Many stores will also send personalized promotions and vouchers to ensure that you keep buying more.

2: Budgeting becomes hard

If your clothing budget is 1,000 and you spend it on a store card which offers 6 months interest-free payments you will essentially pay 166.67 each month for 6 months.

  • It becomes tempting to spend more money the following month as your budget is 1,000 but you only physically spent 166.67 (your first payment). You can easily get confused.
  • If you over-spend on your store card, it doesn’t help under-spending on another category of your budget (e.g. Groceries) as this will not balance your monthly spending. Your store card spending affects the next 6 months worth of budget and it is very hard to keep track.
  • If you are feeling cash-strapped and you decide to purchase no clothing on your card, you will still need to pay for previous months shopping. It will take a while before the outstanding amount is all paid off.

It is very hard to manage a budget when previous months shopping affects the current months payment. In fact, many people give up on budgeting as it’s just too confusing.

3. You get stuck in cycle of debt

If your monthly repayment on your card is quite high, you will probably not have any money left to buy the things you need (or want). So, instead of saving up for the items, we generally just purchase more on the card which makes our monthly payment higher and causes us to have less money each month and inevitably forces us to spend more on the card. It’s a never-ending cycle; until you end it!


If you are tired of being trapped by debt then cancel your cards. Follow the 5 steps below.

Cancel your store cards

Step 1: Choose one store-card

It’s hard to make too much change at once, and you may not have the money now to do drastic things. So choose the card with the least amount of debt.

Step 2: Convert to cash

Do not make any more purchases on your card. Take a photo of the card for reference purposes and then throw the card away. (Or if that sounds drastic, hide it in a safe place). From now on only spend cash instead of the card.

Step 3: Pay a little more each month

When you recieve your statement each month, round the payment figure up and pay a little more. If you payment is automatically debited from your bank, then find out if you can pay cash in the store and make just a small additional payment.

Step 4: Close the account

As soon as you have paid the card off; close the account! Stop the cycle of debt!

Step 5: Repeat with next card

Just slowly pay off all your cards and feel the burden of debt lifting.  You really can pay off all your store debt by making a slow and concerted effort. It may take a few months (or even years), but it is 100% worth it!


Find the Balance

balanceIt’s hard finding the balance between saving for the future, and living for the now. You don’t want to lose out on the wonderful experiences that life can offer you right now; but at the same time you don’t want to end up in a dreadful financial situation when you’re nearing retirement.

So how does one know how much to spend and how much to save? And how do you decide what you can afford to do now and what will be worth it in the long run?

Well, there is no right answer! These decisions will always be tough and sometimes you’ll make the right choice, and sometimes not. The trick is to try and make the right choice more often than not.

It all starts with assessing your current situation and knowing exactly where you stand with regards any debt you may have, as well as commitments you have made. Debt is a bad thing, so take serious look at this! Also, you need to know exactly what you (and your spouse) bring in each month, and exactly how much you spend. It’s this monthly spending where lots of problems come in. You cannot be spending more than you earn; this will cause unthinkable issues in the future and if that is currently the case, you need to fix it! Just stop spending on non-essential items, don’t eat out, don’t buy things you don’t really need, don’t be influenced by your friends to spend when you cannot actually afford to.

When looking at your monthly expenses, think about the value of “things” versus “experiences”. Let’s say you often buy take-aways, think about what else you could use that money for? Would you enjoy to have a massage or go away for a weekend break? How many take-away meals should you substitute with a home-cooked meal in order to have these other experiences?

It’s not a bad thing to buy take-aways, provided you have budgeted for it. The point I’m trying to make is that money wasted could be used so much better! We all have a limited amount of money we earn each month and every single cent that we spend is worth something! We need to slow down on the spending and be conscious of what we are doing with our money.

So back to the beginning, how do we now how much we should be spending and how much we should be saving? Start with assessing your current situation, create a budget and decide on any financial goals. You may need to tweak your budget to make it all work out, but that’s exactly the point of a budget. Work out what you can spend now in order to achieve what you want to later on.

Challenge: Think before you spend!

Financial Check-up

We’ve all been to the doctor for a check-up of sorts. Sometimes it’s as a preventative measure and sometimes it’s to find out what is wrong with us. There are so many check-ups we can go for as there are specialists for every area of health.

Have you ever had a financial check-up though? Just going through a basic procedure to see how well you are doing? As with a medical check-up this could either be as a preventative measure or perhaps you know there is something wrong and you need to find the cause.

FinancialChecklistHere is a quick 5 point financial check-up.  If you answer “no” to anything then mark that as an area of concern.

1: Do you live within your means?

If you spend more money than you make then you are unfortunately headed for disaster.  You may think that things will be okay, but in reality you cannot survive by spending more than you earn. Something needs to change and the only two factors that can change are that you either need to earn more money; or you need to spend less.

If you’re employed you probably don’t have much say on your earnings. You rely on what your boss decides to pay you and you work hard hoping for an increase. You can consider looking at other jobs, or perhaps freelancing or perhaps finding some clever way to earn a little more money. Catalog sales, house-sitting, renting out a spare room, giving someone a lift to work in exchange for petrol money, making lunches for people at work, etc… It may be worth your while or perhaps not. No need to decide anything now, just think about the situation.

When looking at your expenses though, you will probably find that there definitely are areas where you can cut down. The first step is to know exactly how much you actually spend each month so if you don’t know then start with the 30 day challenge of tracking expenses. The easiest way to curb expenses is to make a budget and then to keep track each day that you only spend what you allow yourself to.

You need to be strict with yourself and the first few weeks will be hard as you develop new habits. Discuss the budget with your family so that everyone understands what the situation is.

2: Are you debt free?

Debt is so easily available and it is often marketed as a good thing. Advertisers keep telling us what a great life we deserve to have and thereby entice us to take out debt.

Debt really enslaves you as you will always be working to earn more to pay off the debt. And when you can’t afford the repayments then you can simply take more debt and worsen the situation.

The ideal goal for everyone is to be debt free.  It is completely possible and you can do it no matter what your current situation is. But, it may take you a few years of patience and constant work towards the goal. There is no quick fix, but with dedication you can do it.

The first step is to know what the current situation is. So list all your debt and find all your statements and accounts and calculate how much debt you have. A good habit to form is to take your store cards and switch to cash. So going forward make purchases with cash whilst you pay off the debt on the cards. And once the cards are paid off, close the accounts. I know it may seem too simplistic, but have a look at your own situation and try work out how you can do it.

Debt – no matter what it is for – is a bad thing. If you wish to ever be financially free then you need to manage your debt and set goals as to how to pay it off.

3: Do yo have an Emergency Fund?

An Emergency Fund is not only important for your financial well-being, it will also reduce your stress levels knowing that you have some money for those unexpected things that come up.

You can decide how much you need to save, and in doing so think about unexpected expenses that you have dealt with over the past year or two. A car service, medical issues, household emergencies, family issues, etc. Sometimes you just need extra money and knowing you have it will offer great relief.

4: Are you saving for the future?

This is something that we all know we should be doing, but statistics show that the majority of people are not saving enough for retirement. The amount of money you can save is unfortunately linked to the above 3 questions as there is only a finite amount of income you earn, and somehow all these things need to be managed.

When reviewing your savings have a look at any retirement-type savings you have and tally up the savings. This is also something that should be discussed with your family as it will affect the family once you retire.

Also look at your debt again, generally speaking, the interest you pay on debt is higher than what you earn off investments. Often it is better to pay off your debt than to invest.

5: Do you feel in control of your financial situation?

It is great if you answered “yes” to this question, but if that is not the case then you need to work on this and sort things out. Being in control of your finances does not need to be complicated or time consuming and you do not need to be any sort of expert.

All you need to do is to be conscious of the above 4 questions. Managing your money is a day-to-day task which never ends. If you don’t feel like you know what you are doing then you just need to start somewhere and make a little progress each day, week or month.

Don’t wait until you feel you know what to do; just start taking control of your money now!