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How to shift from a spending to a savings mindset

Top savings hacks from one Absa client to another

For thirty-nine-year-old Absa customer Darron Horowitz, saving is not just a priority, it is a way of life. Over the last seventeen years, his smart savings choices have helped him buy his first home (and several cars), take a sabbatical from work, and travel extensively around the world. While it may sound too good to be true, Darron says that by living a life of intentional spending to save, he has made sensible financial decisions that have enabled him to build up his wealth and look forward to a comfortable future. In a recent interview, he shared his personal tips with us on how to make that shift from a spending to a savings mindset and manage your money for longer-term prosperity.

When did you start saving and why?

My personal savings journey began at age 22 when I started a full-time job. I knew already back then that I did not want to end up like my parents, who had not made sufficient provisions for their retirement. I therefore made a conscious decision to save for an end goal of living independently in my golden years, as I knew there was no guarantee of getting married and having a partner or children to look after me at the end of my working life.

How do you prioritise saving in your budget?

As a twin, my brother and I are poles apart when it comes to saving. Where he looks for reasons to spend, I look for reasons to save. I prioritise saving in my budget by shopping around and asking a lot of questions, so that I can make smart, informed spending choices. For example, I always look for special deals or free delivery, and even before taking an Uber, I compare Bolt to make sure I’m getting the best price every time. Some might call this stingy, but the small expenses can add up to a significant annual saving that can be put to better use in an interest-bearing account.

Do you get satisfaction from saving towards your future and, if so, why?

I personally get a real kick out of saving. Every month, I want to save more than I did in the previous one. It’s infectious! It’s not difficult for me to see the benefits of saving, as I am already reaping the rewards. For example, last year I was fortunate to be able to take a five-month-long sabbatical from work, without dipping into my savings.

When managing money on a daily basis, what tips can you share to help others spend differently?

On debit and credit cards: Only spend what you know you can pay in full every month.

I use my credit card to pay for all monthly expenses and pay it off in full as soon as my salary reflects in my account. In this way, I benefit from 57 days of interest free spending, but I don’t get hit with any additional interest, which can mount up quickly and be difficult to clear. When it comes to choosing your bank account type, don’t be driven by status. What you have in the bank matters more than the colour of your card. I opted for an Absa value bundle that has a debit / credit card in one with a limited number of transactions per month as it’s the most cost-effective option that covers all my banking needs. A bonus is that I also get Absa Rewards for using my credit card, which can be converted to cash. I go one step further by re-investing this ‘free money’ into an interest-bearing account.

On investing: Don’t invest to squander your savings, if you can compound it, do it!

I have multiple investments with Absa, and I always shop around for the best interest rate before settling on a new account. For example, by signing up on the banking app, you might receive a more attractive digital interest rate. When choosing the best investment option for you, make sure you are in it for the long haul and make a commitment not to dip into your savings. A good place to start would be a tax-free savings account, which allows an annual tax-free savings of R36,000 per year (or max R3,000 per month). But if willpower is a problem, perhaps a better option would be a fixed longer-term investment account that charges penalties for withdrawing early, to encourage you to stay the course.

Most importantly, only put in what you can afford to live without. But once it’s in, leave it there, so that the interest can compound over time and earn you even more without you having to lift a finger.

On buying a car or a home: Cut your cloth according to your table.

Personally, I have a thing for cars – I’ve bought several through Absa vehicle finance in the last 15 years. Although buying a car that depreciates might not be seen as the smartest financial move, what’s important to think about before making big purchase decisions like these is: if you were to lose your job, could you still afford that asset? Don’t buy more than you can afford to spend if you are not working. In the case of a car, you need to consider the frills, as well as the (increasing) cost of petrol and insurance premiums. For a house, it’s the more expensive levies of a bigger home in a nicer area. Whatever choices you make, ensure that they are right for your budget. And if you can afford to be without it, then don’t buy it.

Any final words for our inspired savers?

Spend with your brain and not with your heart, your heart gets you into trouble, your brain protects you.

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