How you should divide your monthly income – and how much you should be saving

There is a rising appetite among South Africans, particularly younger generations, for running a business and becoming their own boss.

This is according to the Old Mutual’s latest Savings and Investment Monitor (OMSIM) which found that a third (34%) of Generation Z (ages 18-24) South Africans who are not currently self-employed think about starting their own business either all the time or a lot of the time.

Lisa Airey, strategy analyst at Old Mutual Unit Trusts, said that whilst it is promising to see such an eager entrepreneurial spirit among younger generations, it’s important to address the hurdles that are holding these hopeful entrepreneurs back.

“When we asked respondents who indicated that they do think about starting their own business, what was holding them back, the primary barrier cited was a lack of funding,” she said.

“While this finding is disheartening, it is unfortunately not surprising, as the vast majority of South African businesses are self-funded. Thereafter, the primary source of funding is loans from family, with little evidence of loans from financial institutions.”

Below, Airey offers five investment tips to young, hopeful entrepreneurs who are looking to finance their first business without getting into a debt trap.

Define your investment objectives

Firstly, Airey highlights the importance of accurately gauging how much capital you will require to turn a business dream into a reality.

“This is a crucial balancing act, because underestimating your capital requirement could result in running out of money before the business has a chance to become profitable; while overestimating costs could delay the process unnecessarily.

“Once you have an accurate estimation of what your investment objective is, you’ll be able to calculate how much you need to save to achieve this investment goal,” she said.

Establish how much you can put way each month

“One of the biggest barriers to saving successfully is spending whatever is left over after we meet our monthly financial commitments.

“To avoid this, we need to make saving a financial commitment in itself,” said Airey, who suggests the simple 50/30/20 rule when budgeting and allocating money to saving and investments.

“The rule is simple: of your income, 50% should go to your living expenses, 30% should be used for flexible spending, which could include DSTV, internet, gym fees, and other miscellaneous negotiable expenses, and lastly, 20% should be allocated to your formal savings and investments.”

Budget for a marketing plan

“The key to business success is developing a marketing plan from the very beginning,” said Airey.

“Budgeting for a marketing plan should be factored into any business’ set up operating costs.” A good marketing plan will set clear objectives for your business and ensure you set realistic and measurable goals and know who you need to target to grow your business.”

Set a launch date

“You’ll need to be realistic in calculating the time horizon here,” said Airey, who also suggests selecting a unit trust that is best suited to achieving that goal.

“After settling on your launch date, select the right unit trust investment appropriate for your risk profile and time horizon.”


Lastly, Airey suggests setting up a debit order to ensure monthly investment contributions are adhered to.

“The most important trait of a successful investor is consistency in monthly contributions. Setting up a debit order will avoid the risk of being tempted to spend money that you should be saving and will ensure you never go a month without getting one step closer to living the dream of being your own boss,” she said.

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How you should divide your monthly income – and how much you should be saving