Some things, like Covid-19, we simply cannot control, but managing your money effectively and taking charge of your financial future is possible. Here’s how
Financial planning has never been more important, and consulting financial institutions such as banks or use financial apps to devise a financial roadmap for what will most likely be another difficult year is important. With this said, here are five money management principles to start the new year right:
Revise or create a budget – While this seems like an obvious task, many people do not put their budget on paper or on apps or spreadsheets. It is important to write down all your income, expenses (covering both needs and wants) in order to have a clear picture of your finances. This picture enables you to see where your money is going and if you can cut back on some non-essential spending in order to put this money toward your savings.
Have an emergency savings fund – If there’s one thing 2020 taught us is the importance of having an emergency fund reserved for emergencies or loss of income. It is advisable to save between three-six months’ worth of your monthly expenses.
Don’t cancel your insurance and medical aid payments – Insurance and medical aid are non-negotiables; they should not be used as a mechanism to free up cash. Once a policy lapses or you cancel it, you expose yourself and your family to greater risk.
Invest your money for the long-term – Get advice from your bank or a financial advisor on where to invest your money. There are different asset classes that you can invest in such as shares, fixed deposits, property, retirement annuities just to name a few.
Managing your debt – Paying off debt sooner will save you money. If you can still afford to honour your credit obligations, pay a little more toward them. Managing your credit better also means keeping a good relationship with your credit providers. If you are unable to make repayments, contact them, hiding or ignoring them may lead to financial penalties which affect your credit profile in the future.
Words: Dhashni Naidoo, FNB consumer education programme manager