It may sound like a curse word to many. Financial planning, however, is essential to your financial success. If your situation feels more like a financial mess - please lend Fincheck an ear.
South African citizens can expect a bumpy ride in their 2016 finances. A high inflation rate, rising interest rates and a weak Rand will lead to the financial demise of many if they don’t take hold of their finances today! All these factors will cause South African food prices and debt servicing costs to rise. Now is the time to make use of wise financial planning.
Old Mutual has an On The Money programme. There they host some solid financial advice helping the average South African with 5 excellent money managing tips. There are plenty more places to learn on how you can manage your finances, do a google search on 'financial planning' and you're sure to find a couple of hints!
We've set aside some of the best tips for your financial planning
Set Goals
Before you start saving or paying off debt, commit to something. Set goals that are realistic. Set goals that are encouraging. Make use of goals that have an expiration date. A goal without an end date remains a daydream.
Save First
Before you start chipping away at your salary with meaningless expenses, choose to save first. Set out a goal of how much you need to save and save that amount first thing every month. The same principle counts for the payment of debt.
Destroy Debt
Plan and manage your debt. Count the cost before you apply for a loan. See if you have of the capability to repay the debt. Please remember that living expenses will see a significant increase in South Africa in the time to come. This means that unless your income experiences an increase equal to that of your living expenses you will have less money to repay debt. Identify pitfalls before you start loaning money. If you are in debt – take charge and start paying off that debt with force.
Start Budgeting
And do it properly. Don’t only do it for the first two weeks of every month. If you don’t know how to allocate your money – start writing down what your income and expenses look like in a month. You will be able to identify the necessities and the unnecessary expenses in the blink of an eye! Also, remember to have enough space in your budget for unexpected emergencies. It could be that food prices suddenly rise or that something around the house like the geyser gives in.
Money. Makes. Money.
Understand the principle of the time value of money. This means that money will create more money over time, that can either be in the form of an investment or in the form of debt. Obviously, money in your wallet won’t multiply, but the principle counts towards investments and debt. Understand the power of compound interest. The tempo at which either debt or investments increases will only speed up if the balance amount of both aren’t decreased. You decide which way compound interest will work for you – if it will multiply the investments you hold or if it will increase your debt with added interest.
The best word of advice is probably to just start. Take action! If you make mistakes you’ll learn and you’ll correct them. But waiting for life to happen will only leave you in a world of indecision and growing expenses. Make one correction today and make one financial planning goal today!
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