Stick To This Year’s Financial Resolutions
If your New Year resolution is to get your finances in order, don’t try and tackle it all at once. You will become overwhelmed and more likely to give up. Rather set yourself monthly tasks and aim to have your finances overhauled and organised by the end of the year.
Here are some ideas on how to make smarter decisions about your money.
JANUARY: Understand your money expenses
Firstly, you need to recap. Collect all your statements from last year so you get an idea of where you spent your money. There are several great money management apps that can help you track your expenses like Expensify or Mint. Restaurants, shopping, entertainment, car payments – it all adds up. If you want to get control of your money, you have to understand it. Now set a budget and talk to your family about ways to cut back and save more. Also start to keep a record of your spending each day – by tracking your expenses you become more aware of your habits.
FEBRUARY: Kick start your savings
You have just recovered from December and paid your big annual expenses like school fees in January. Now is the time to boost your savings by using your tax break to boost your retirement savings. You have until the end of February to put away 15% of your salary into either your company retirement fund or a retirement annuity. Speak to your accountant or financial adviser to find out how much you can put away to maximise your tax benefit.
MARCH: Target your debt
Credit card debt is a disaster – you’re basically going backward financially as long as you carry an outstanding balance from month to month. If you just pay the minimum amount owing on a R10 000 credit card balance it will take you 26 years to pay it off! That is longer than it would take to pay off your house. Target your smallest debt first and then work your way through those store and credit cards. To stop going back into those bad habits cut up the cards and live like a pauper till you get out of credit-card jail. If you found you lost control of your budget last year try living with just cash for a month and lock away the plastic. Draw your weekly budget from the ATM and just use cash – studies have shown that people tend to spend 25% less when they use physical cash rather than cards.
APRIL: Build up an emergency fund
Financial Health 101: have an emergency fund. You will never get out of the debt cycle if you have to rely on a credit card when you have a financial emergency. Even if you are paying off debt start putting some money away each month into a money market account for emergencies. Your aim is to have three months’ worth of household expenses for emergencies.
MAY: Tackle your insurance
Chances are you are wasting hundreds of Rands a year on home and car insurance. Shop around to find cheaper coverage. Also look at the amount you are insuring: as your car loses value, you should reduce the amount it is covered for. You can also save more by increasing the excess on your policies by the additional amount you have saved in your emergency fund.
JUNE: Start an education fund
It is never too early to start saving for your child’s education. There are many options available including unit trusts and education policies. Create a disciplined approach to saving for education.
JULY: Check your progress
Given that we have reached the half-way point, it is time to check your progress on the cash flow. Print out all your statements. Analyse spending by categories. See what you planned to spend, and what you actually spent. This is a constant battle. How is that emergency fund coming along?
AUGUST: Spring clean your investments
Decide on the asset allocation you should have, then look at what you have right now: mediocre unit funds, shares bought on tips, money left sitting in a low-yielding account? Stop procrastinating. Rather than cancelling policies and incurring further fees and penalties, look at the choices you have, for example to change portfolios, in the existing structures to accommodate your needs. Clear out the rubbish, and make the money work for you.
SEPTEMBER: Invest in yourself
Your knowledge and skills are your most important assets. Consider how much you could improve your life if you invested in a leadership workshop, better communication skills or anything to improve your work performance. In time it should pay off handsomely. It is also time to look after your health, especially if you tend to exercises less and overeat in winter. Use your medical scheme’s free preventative health checks to give your body the once over. A healthier you could save significant medical costs in future and potentially secure cheaper life cover.
OCTOBER: Update your will
Do you have one? And if you do, how long ago did you check it? Circumstances change. Maybe you’ve had children or grandchildren. Or minors have graduated. Your assets have grown (or, alas, shrunk). Too many people avoid dealing with their wills because thinking about death makes them feel uncomfortable. However, dying without a will, or a will that is out-of-date, can cost your family incredible amounts of pain and money and throw away decades of hard work.
NOVEMBER: Review your medical and insurance cover
It is time to consider your medical aid contributions: What benefits and cover are you likely to need? Often it is tempting to reduce your benefit cover at this point, only to realise that you have many more out-of-pocket expenses. Many South African’s are under-insured. If you are about to embark on a hazardous year-end holiday journey, is there sufficient life and disability cover in place should something unfortunate happen?
DECEMBER: Negotiate a Christmas truce with all the adults you know
That means family, extended family and co-workers. Stop the holiday shopping waste before it starts. This may save you hundreds of Rands. The only thing you will lose will be a bunch of socks and ties you won’t wear and trinkets you don’t want.
Remember, your financial adviser can help you make the most of your finances by helping you develop a financial plan that suits your circumstances and making sure that you stay on track with your finances.
Contact us today to speak to one of our Financial Advisers for a free consultation. +27 14 594 2388