6 ways to improve your financial situation

Studying a financial degree and working in a finance type job does not make one a financial expert, and I certainly don’t claim to be one. However, some of my best friends are in industries which have nothing to do with Finance, and they look to me for help so I’ve tried to school myself on these things. I’ve also found that Mac financial software is most helpful during the learning process.

Over the years I’ve realised that many people have no clue how to save/ what to save in, so I thought I’d compile a little list of things you can do now to improve your financial health, regardless of what you earn!

1. Save
I of all people have an issue with saving for some undefined event/ thing in the future- I’m all for short term gratification. I know the rule of thumb is to have the equivalent of your salary for 3 months in savings, but who can afford to do that?!  My tips for saving are: – Short term savings: Save towards something, be it a car deposit, holiday, or iPad. Set monthly savings goals and stick to these. This makes it easier to set aside money than just saving for the sake of it.  – Long term savings: With the economy being the way it is, most of us are at risk of losing our jobs in the future. A “nest egg” is imperative! Set up an endowment fund with an asset manager, like Liberty or Momentum. This means that a debit order will go off your account every month. It makes such a difference to have a debit order going off rather than physically transferring the money yourself- you’re almost forced to save.  The asset manager will then invest your money in a portfolio suiting your risk appetite. Start small, even R100 makes a difference. You can invest for a period of 5 years, after which you will get a payout or choose to reinvest your money. The return on these is way better than a normal savings account. Of course, the downfall is that you won’t have immediate access to your money- but that’s what short term savings are for!

2. Invest in your future
If you work for a corporate, you’ll most likely have a pension fund. The amount you’ll get from this pension fund is painfully inadequate to sustain you when you reach retirement, so you MUST take out a separate retirement annuity. You don’t want to be 60, unemployed, and living off toast and marmite. You want to enjoy the same standard of living you’re used to.

– Contact Liberty or Momentum or any of the others, and set aside R200-R300 a month for your retirement annuity. There’s also a tax benefit here- If you move jobs, do NOT cash out your pension fund. This is not a bonus for you! This is money for your future, it’s not yours to spend now.

3. Ditch the Debt
I’ve been in that credit card cycle where you spend money on your credit card, pay it off when you get paid, then go into debt again. Once you’re in the cycle it’s difficult to get out, but if you work somewhere where you get a bonus or 13th cheque- use this to get out of debt, then STAY out of debt.

– Don’t buy something if you don’t have the cash to pay for it. Wait till you can afford it before you buy it
– Put money onto your credit card when you get paid, and don’t spend more than what you have put in
– Use your credit card wisely! I’m always shocked when I hear of people who have credit cards where they don’t get Ebucks, miles or anything back in return. You can get hundreds of rands in benefits back every month if you’re on the right loyalty programme. I personally use the SAA credit card, from which I get a free international flight every year. I also use the Woolies credit card, which you can read more about in this blog post. You should use one with benefits to suit your interests.

4. Spend money on what you like, but don’t invest too much in depreciating assets
You work hard for your money, and you deserve to enjoy it and spend it on what makes YOU happy- whether it’s a Chanel scarf or a sports kit for your car. Don’t be influenced by what makes others happy or what the conventional things are to spend money on.

– Be careful of investing too much in depreciating assets. These are things that lose value as time progresses, like a car or anything computer/phone related

5. Curb eating out
With even takeaways going up in price, eating out can really add up to ALOT over a month. Try and keep restaurant and takeaway visits to a minimum and make them a treat rather than the norm. You’ll be surprised at what a saving this can be. It’s also so much healthier to eat at home, so that’s a double bonus

6. Buy, don’t rent
If you’re renting a home, you’re paying someone else’s bond- simple as that.  With interest rates as low as they are, it is now absolutely affordable to buy a home instead of renting. Sure, renting is appropriate for short periods of time but definitely not as a long term solution. Don’t worry too much about finding the “right” place to buy. If you buy anywhere that’s not a farm, you should be able to rent the flat out if you don’t want to live there, and your rent can sometimes cover your bond and your levies.
Further, get an access bond, meaning you can put extra cash in the bond and take it out again when you need it. If you consider that you’re probably paying 9% interest on the bond and only receiving 4% interest in a savings account, this makes sense.

I really hope this has helped you, even just a little! Do you have any finance tips that I’ve missed out? Let me know…

If you need someone to talk to about setting up a retirement annuity or endowment, I can HIGHLY recommend my financial advisor, Ari Kruger from Liberty. He has been with me since I was 20 and helped me to save when I was earning barely nothing. He’s one of those people that cares about YOU, not just your money. Financial advisors in general don’t cost anything, they get a commission off the premiums you pay, but in my experience it’s worth every cent. Ari did my will for free, and I can call him anytime with any questions I have about these things. This post was not sponsored in any way- it’s a wholehearted recommendation from me. Call him on 011 381 5953.