By Danelle van Heerde, 24 January 2017
A study commissioned by The Charity Shelter in Britain recently showed that more than a third (37%) of working families in the UK would not be able to remain in their homes if they lost their jobs, as they simply do not have enough savings to cover the financial gap resulting from employment or an unexpected expense.
“The situation is not that different in South Africa. Many people, no matter how much they earn, live from pay cheque to pay cheque and don’t have anything left at the end of the month,” says van Heerde.
Local studies have consistently shown that many South Africans turn to debt to fund even negligible financial emergencies, as most do not have an emergency fund in place.
An emergency fund should ideally have enough savings to cover three times your monthly salary. This will help you to self-fund day-to-day expenses and meet your monthly debt obligations should you become unemployed. However, many people deem this target unrealistic and van Heerde says the key is to break the hand to mouth pattern.
“A strategy of saving whatever is left after spending is unlikely to succeed or get you out of the pay cheque to pay cheque scenario. You need to do the reverse of that in order to break the pattern.”
She shares steps that can help you start saving from your currently stretched budget: