1 Prioritise your financial needs
Without a sense of priorities, you’ll have limited success in planning your budget. Decide what you most critically need to spend your money on, and develop a realistic spending and savings plan. If your children’s education is a key concern, then list it as a priority area and move that flat-screen TV down the list.
2 Call in the experts
A meeting with a financial planner is the first step on the road to financial independence; what follows is entirely up to you. A good qualified planner will take a holistic view of your financial situation and will suggest a plan to help you reach your goals by considering your life stage, financial position and time available to reach those goals.
3 Clear and avoid unnecessary debt
Financially stretched or not, the last thing you need is excessive debt. This can be defined as debt that you have incurred to buy things that you don’t really need. Through careful planning with your financial planner, try to pay off all your expensive debt such as your credit card or personal loans. Anything bought on credit ends up costing you a lot more than the original price, so save up to buy something rather than paying it off – and save on interest!
4 No credit cards
With no monthly credit card payments you will be able to purchase more things in cash, and you can avoid credit purchases and the interest payable that comes with credit. To remove the temptation of clocking up credit card debt again, leave your card at home or commit to only using it for emergencies.
5 Plan for your old age
You are not able to generate an income forever, so make sure your financial plan makes full provision for your retirement. Your planner can suggest retirement savings options that can accommodate your budget and financial goals. Ask your financial planner about the tax benefits of taking out a retirement annuity (RA).
6 Protect your income
Just as you should insure your prized possessions, such as your car or house, it is important to protect your greatest asset, your ability to earn income. This asset can disappear in a flash, for instance if you are disabled in an accident or if you lose the ability to work due to serious illness. Most people think it won’t happen to them, but it really isn’t worth taking that chance. A range of income protector plans or disability cover options are available from financial services providers to safeguard yourself if you are no longer able to work.
7 Quite pricey bad habits
Smoking doesn’t just spell bad news for your health. It’s also bad news for your pocket. Depending on how much you smoke, quitting the habit can save you about R600 per month (or R7 200 a year). Also, a non-smoker generally pays lower life insurance premiums and is healthier, which means fewer visits to the doctor and saving on medication costs.
8 The s-word…
If you want to achieve your financial goals and live your dreams, you simply have to start saving. If your employer offers you an annual increase, allocate a portion of it to savings before you get used to having the extra money in your pocket. Better yet, set up a monthly savings account debit order on the day you get paid! That way you won’t miss the extra money, as it will feel like you never really had it to begin with. You might think you can’t afford to save, but you will be surprised how you can make it work if saving is your priority.
9 Work on your spending habits
It’s easy to spend our hard-earned salary on less important expenses – money that could be used to achieve a particular goal, or for emergency savings. Because it’s so easy to “swipe the plastic”, leave your credit cards at home and try to only bring them out in emergencies. Watch out for cash leakage. If cash in your purse disappears – leaving you with nothing to show for it – take note of what you spent it on.
10 Plan your spending
Plan purchases. Only buy what you planned to buy. Make a shopping list and stick to it so you don’t overspend. When buying big, expensive items, do an online search for price comparisons. Always ask yourself: do I really need this? If the answer is no, then put the item back and walk away.
11 Make sure you have a Will
Everyone should have a Will. Not only does will it indicate the beneficiaries of your estate when you die, it also helps to ensure that your last wishes are known and understood. For example, you may have very specific instructions on who should take care of your minor children should you die unexpectedly. Having a Will means that your family and friends will be comforted during a very difficult time in the knowledge that your last wishes were clearly communicated.
12 Plan for the longer term
Once you’ve put everything into place, set your vision on the longer term. It’s well and fine to plan one year in advance, but to really achieve your goals, you need to think further ahead.
By Karin Muller, Head of Growth Market Solutions at Sanlam