Cara is 55 years old and is tired of working and ready to retire. She has recently seen a financial planner who told her that her pension fund and R 300 000 unit trust investment would not be sufficient to allow her to maintain her standard of living during retirement.
Bottom line, Cara was not able to retire as she had not saved enough.
Cara was very upset and didn’t understand why her pension fund and her unit trust was not enough. She was adamant that she could not have saved any more than what she had during her working years. Where did it all go wrong for Cara?
Cara started out in the working world in a graduate recruitment program at age 25. She started receiving a net income of R 3 000 pm which escalated at 10% per year. This is where it gets scary… Cara, during her working life, would have received over R 6 500 000 in her bank account by the time she was 55. So, what did she spend it on? She doesn’t know. That’s where she went wrong. She never kept track of her expenses.
Do you monitor where your money goes?
How many of us have gone to the shops to buy a few specific items, but have walked out with an extra packet or two of groceries that were not on our shopping list?
Have you ever noticed how stores in shopping centres display items in their windows or why the bread and milk (the two most essential items in a grocery store) are located at the back of the store and often at opposite ends?
Create a spending plan
Retailers are aware that consumers often do not stick to a budget or a spending plan and often buy items on impulse. You need to have a spending plan that you follow to ensure that you don’t spend excessively in certain areas. This is not to say however that you cannot spend your money on things that you enjoy and/or want.
More money than you realise will pass through your bank account during your lifetime. If you don’t have a plan for your money, you will not be able to save effectively. Simple ideas such as putting money aside as soon as one gets paid and avoiding debt and above all, having a plan for your finances can help you achieve financial security.
If you haven't already done so, start to follow a spending plan. Take out a 3 month banking statement and see what you have spent your money on. Work out what is realistic to spend in each department (groceries, entertainment, savings etc) going forward and follow it rigorously. This should enable you enjoy your life now, and should help you towards achieving your goals in retirement.