Saving is unfortunately not part of our psyche and many South Africans are burdened by high debt levels. As much as three-quarters of disposable household income in our country is spent on debt repayment, which is not a fertile environment for wealth creation. Here are a few ways to get you onto the path towards saving and financial freedom.

Step 1: Draw up a realistic monthly budget

Compile a list of your monthly income and expenses. Your income should cover expenses comfortably. If not, see where you can cut back. Ask for more competitive vehicle and home insurance quotes and cut down on unnecessary spending. Try to distinguish between your “wants” and your “needs” – but don’t cut out all of your “wants”. If your budget is too rigid and boring, you are more likely to stray after a month or two. Work some contingency money into your budget and define a realistic amount to save. If you have spare cash at the end of the month, use it to clear your debt quicker.

Also remember that having a financial safety net for unexpected expenses is a very good idea. To create one you need to get into the habit of saving – even if you can only set aside R100 a month in a separate savings account – and then curb the temptation to dip into your rainy day fund. Seeing your balance grow steadily will motivate you to save even more.

Step 2: Pay expensive debt first

The higher the interest rate on your debt, the more expensive it is, so when paying off debt, pay the most costly ones first. Credit card and store card debts are likely to be the most expensive. These and personal loans can cost you up to 20% or more in interest. It helps to pay more than the minimum amount owed each month because the interest you owe will automatically decrease.

But do not stop paying your other credit providers – you do not want to jeopardise your house or risk losing your car. You could also be blacklisted, which will make it very difficult to obtain credit in future.

If you genuinely can’t pay off your debt (for instance, if you have been retrenched), don’t panic. Contact your credit providers to work out realistic payment plans. This will help protect your credit record and save you some stress.

Step 3: Become a financial guru

Spend smart. It is possible to find good quality and low prices if you shop around and find out where to find the best deals. Shop around for the best clothing prices, cellphone packages and medical aid deals. Try to refrain from going on a spending spree at the beginning of each month, only to dip into your overdraft by the middle of the month. Try breaking bad spending habits, and refer to your budget to see what is not essential in your monthly financial mix.

Step 4: Live within your means

If you can’t afford to pay cash, you probably can’t afford it. If you have to put that Louis Vuitton bag or flat-screen HD TV on your credit card, it’s out of your price range. Opt for another brand. And when buying a car, don’t over-extend yourself. Choose an affordable second-hand model and finance it over the shortest period possible.

Cash is king, so give credit a wide berth. A debit card linked to a savings account can only be used if there is a positive balance in your account, so running up debt is impossible. This, or drawing cash, is a foolproof way of staying out of trouble. If you do need to use your credit card, try to pay the full balance at the end of each month rather than just paying the minimum amount owed. That way no interest will be charged.

Step 5: Think of the future

Planning for your retirement is the key to maintaining your financial freedom in your golden years. When all is said and done, you want to be comfortable and thrive in your old age.

So set aside at least 15% of whatever you earn every month for retirement – whether in a company pension fund, retirement annuity or other forms of savings. If you don’t make saving for retirement your top long-term priority, you will be faced with either late retirement or poverty, or both.