However, this is not the case for the vast majority of people, including a large group of mid-career, higher-income earners.
Lezanne Human, CEO of FNB Savings & Investment and Fiduciary, says individuals and households who not only enjoy a substantial income flow, but also generally have a relatively high expense base, also need to save. "It is a truism that in general, higher incomes are offset by higher expense levels. A clear indication of how narrow the gap is between income and expenses, irrespective of income levels, is reflected in the data that many indebted individuals (and households) are in higher-income brackets.
"Data reveals that a percentage of high-income earners is indebted and is applying future incomes for current consumption. For these people, as opposed to entry-level and average income individuals, debt is often incurred on high-price items such as luxury vehicles, homes, furnishings and exotic travel," Human says.
Establish a framework
There are five principles to establish a framework to govern savings behaviours, and these are as applicable to a starter-saver as to a million rand saver.
"Due either to circumstance (for example, an inheritance) or having accumulated assets over time, some individuals have sizeable funds to save, invest or reinvest. The particular situations of such potential savers and investors will vary considerably.
"Such variations include life stage, employment status, existing investment portfolio and net asset base, income levels, cost base and credit conditions. There is unlikely to be a particular savings or investment solution that will suit two different circumstances, thus any illustration is merely indicative, at best (and does not suggest advice in any form whatsoever)," says Human.
Weak rand
Almost everyone loves to travel once they have started doing it and the bug bites. However, some people are smitten by wanderlust; they need to travel ongoing or they cease to find meaning in life. Such souls will juggle and budget the following sorts of variables long in advance so they can plan and dream of their next travel-fix: annual leave allocation, partner's holiday window, school vacations and of course, finances.
Living in a country with a weak and ever-weakening currency, and planning to travel frequently to stronger currency destinations requires especially disciplined savings behaviours; therefore travelling anywhere for a South African is a major outlay.
Whether the plan is for a single person or for a four-person household to travel out of the country twice a year, there needs to be a savings plan, probably over the medium term. Alternately, a long-term investment could be used to feed a cash-based account as and when required for the bi-annual excursions.
