(Click here to learn how to budget.)

History aside, Professor van Aardt argues that it is the lack of budgeting that prevents people from saving.

Despite being educated, Van Aardt says higher income earners are surprisingly financially illiterate when it comes to managing their day to day personal finances. Budgeting and calculating the real cost of taking on debt is not something the average high income earner considers before making a purchase.

Part of this is a psychological response. People feel that if they need to talk about money or have to budget for items, they have failed to provide for their family. Yet it is virtually impossible to live within one?s means without a budget. How can you know what you can afford if you do not know how much money is coming in and out of your account? A business would not survive long if it did not manage its finances with a good understanding of its cash flow and costs.

How to budget for savings

(Click here to learn how 'paying yourself first' will help you save, no matter what.)

The mistake many people make when creating a budget is to start with all their monthly expenses and then calculate what is left to save ? which is why so many people say they cannot afford to save.

• It is just as important to pay your future self as it is to pay for current expenses.

• First deduct your savings from your available income. What is left is the 'real' amount of money you have for expenses.

• If you do not already save enough, you may find that the first few months will be tight financially, but you will adjust to living on the new income.

• Your priorities will change and you may find that knowing you are living within your means will provide greater satisfaction than buying a new pair of shoes or plasma screen TV.

• What the Consumer Vulnerability Index shows us is that the more savings we have the less vulnerable we feel ? which can surely only add to our long term happiness.