Did you know that 76,58 % of all South Africans are flat broke before the end of the month, according to Debt Rescue? Can you relate to the average British worker who is cash strapped just 17 days after payday, according to a survey by a UK bank? If you answered yes to either of these questions, you may know a thing or two about the post-payday blues.
Tasmin Ali, Insights Initiative Leader at Metropolitan Retail, says that the reason why most people are broke soon after payday is that they have a ‘spend now, save later’ mentality and also don’t have a clearly defined financial plan. “By being savvier with your salary, you can make your paycheque last until the next payday AND still save for life goals like an overseas trip, new car or even just being able to retire comfortably.”
Tasnim’s top tip for making your salary stretch – while also saving for your future – is the 50/20/30 formula. What this means is that 50% of your income should be spent on living expenses, 20% on savings, with the remaining 30% being your disposable income.
“Start by working out what your income is after tax and then calculate your living expenses like rent, car repayments and groceries. You should set aside no more than 50% of your salary after tax to these expenses. Bear in mind that this money should only cover the essentials that impact your quality of life – such as electricity and prescription medication, not your wants, like DSTV and other things you can live without,” shares Ali.
She continues: “Putting 20% of your salary in savings products, investing it in retirement annuities or using it to settle some of your debts can help set you up for financial security in the long run, so think of it as enduring temporary pain for future gain. You don’t have to start with a big amount, but rather what you can afford, even if it is as little as R100. Make sure that as soon as your salary hits your account you put your savings away before your debit orders go off and before you get the chance to spend it.”
“While you can use the 30% left once you’ve covered your more important costs on wants like cellphone data, takeaways and clothes, it is important to make some adjustments to your spending so your money stretches even further. For instance, you could limit the number of times a week you buy lunch and instead make your own. You could also cut down on how often you go out for drinks after work and ditch designer brands, opting instead for more affordable items,” advises Ali.
She concludes: “Making small changes to the way you spend your salary can pay off and keep the post-payday blues away.”