10 WAYS TO FIX YOUR FI­NANCES IN FICKLE TIMES

It’s that time of the year when your spend­ing is about to in­crease. Hol­i­days, gifts and a new year – which brings in­creases in your big ticket items – are a cou­ple of months away. Make sure you are pre­pared and en­ter the hol­i­day sea­son and new year with a

Finweek English Edition - - FRONT PAGE - BY MAR­CIA KLEIN

Spring is here and with it comes much more en­ter­tain­ment, out­ings, hol­i­day plans and gift pur­chases for Christ­mas.

But be­fore you rush out to wine, dine and book tick­ets and ac­com­mo­da­tion, re­mem­ber that most peo­ple spend more money be­tween Novem­ber and Fe­bru­ary than they do in other months.

Spend­ing on Christ­mas, an an­nual hol­i­day and higher-than-in­fla­tion Jan­uary in­creases in ed­u­ca­tion, med­i­cal and other fixed costs leave many peo­ple start­ing the new year cash-strapped. It can take months to re­cover, only to be faced with the same prob­lems the fol­low­ing year.

Now is the time to spring-clean your fi­nances and do some­thing to en­sure the cy­cle is not re­peated.

1 KNOW WHAT YOU SPEND

Analysing your ex­penses may turn up some nasty sur­prises, par­tic­u­larly in tech­nol­ogy and trans­port costs. You don’t cover these ex­penses in a sin­gle pay­ment and have prob­a­bly lost track of the to­tal cost.

If you add up sep­a­rate spend­ing on cell­phones, data, ADSL and DStv you may be shocked at the to­tal monthly ex­pense.

Sim­i­larly, if you add up car re­pay­ments, ser­vices, fuel, in­sur­ance, f lights and or­der­ing the odd Uber, you may find that trans­port costs are way higher than you think.

The big­gest spring- clean you can do is to get a han­dle on your bud­get and ex­penses, says Ian Beere, man­ag­ing di­rec­tor of fi­nan­cial plan­ning com­pany Netto In­vest. Get your bank state­ments for the last three months and look care­fully at where you have spent money, where you have wasted money and where you can change your spend­ing habits. If you are pay­ing for some­thing you hardly use, give it up; if you can con­sol­i­date some pay­ments, make the change.

2 MAKE A SEA­SONAL BUD­GET

Work out a sea­sonal bud­get from Novem­ber to the end of Jan­uary – in­clud­ing fes­tive sea­son spend­ing on gifts, en­ter­tain­ment and hol­i­days – and school uni­forms and books. Work out what your new fi­nan­cial com­mit­ments will be in the new year, in­clud­ing in­creases in ed­u­ca­tion, med­i­cal costs and in­sur­ance premi­ums.

Chris­telle Louw, ad­vice part­ner at Ci­tadel In­vest­ment Ser­vices, says plan­ning is key. Draw up a list of ex­penses that are out of the or­di­nary – not your nor­mal house­hold ex­penses, she says. These in­clude reg­is­tra­tion fees for school, new uni­forms, Christ­mas d i nners, gifts and hol­i­day ex­penses, she says. The list should also in­clude items such as sta­tionery, staff bonuses and in­sur­ance in­creases. Pri­ori­tise what is im­por­tant. Cer­tain things can be changed, while oth­ers are not ne­go­tiable. Spend­ing on text­books, for ex­am­ple, is prob­a­bly not some­thing you can change but Christ­mas din­ners or hol­i­days can be planned on a stricter bud­get. Think care­fully be­fore mak­ing a res­o­lu­tion to get fit and tak­ing out a gym con­tract you will hardly use. You may find you are pay­ing an an­nual pre­mium for in­sur­ance cover and can change it to a monthly pre­mium or move it to another month where your fi­nan­cial stress is less. These are things you can plan now to make Jan­uary eas­ier on your pocket.

Louw says there are also things some peo­ple can do to earn more money over these months be­cause the busi­nesses they work for are busier at this time of year. “A lot of peo­ple have the op­por­tu­nity to earn more if they work more or have longer hours, or if they are com­mis­sion-based – this is the sea­son to do it.”

Louw s ay s most peo­ple, how­ever, have lim­ited ca­pac­ity for spend­ing and it is im­por­tant to be pre­pared and to cut down where pos­si­ble. You have to go into the sea­son know­ing it might be tighter than the year be­fore and list­ing the big ticket items that will hit you will en­able you to make de­ci­sions now.

Be­cause many peo­ple get paid early in De­cem­ber and spend more than usual over Christ­mas, Jan­uary is the long­est month fi­nan­cially and they are then back in the cy­cle of tak­ing out loans or spend­ing the year on the back foot, ac­cord­ing to Gary Kayle, coach at The Money School.

As t he weather i mproves, peo­ple start go­ing out and you need to make de­lib­er­ate de­ci­sions about how much money you are go­ing to spend so you don’t have a sink­ing feel­ing when you see your credit card bal­ance, he says.

3 CHECK YOUR IN­SUR­ANCE

Have a look at in­sur­ance poli­cies and how much cover you have. “Maybe things have changed and you need more or less. Events can trig­ger the need to change. For ex­am­ple, you may have ac­cessed your bond so you have more debt, or you got a pro­mo­tion, have a big­ger ed­u­ca­tion com­mit­ment, or you could have in­her­ited money, which could de­crease your cover,” says Beere. Ask your­self if the cover is still ap­pro­pri­ate in your cur­rent cir­cum­stances.

Check your life in­sur­ance and make sure you aren’t over- or un­der-in­sured. Beere says you may not have looked at it for years and it may no longer be suit­able and may re­quire changes.

4 PUT YOUR SAV­INGS IN THE RIGHT PLACE

Check how much you are sav­ing and whether you can af­ford to make t he pur­chases you are plan­ning. Once you have done that, check that your sav­ings are be­ing put to work to make more money.

Beere says it is im­por­tant to de­cide if your sav­ings are go­ing to the right place right now and, if not, you may want to in­crease cer­tain ar­eas of in­vest­ments and re­duce oth­ers. What­ever t he cir­cum­stance, di­ver­sity is key.

Many peo­ple as­sume their pen­sion fund is fully in­vested i n shares, so t hey stay away from eq­uity in­vest­ments, but it is im­por­tant to look at where your pen­sion is ac­tu­ally in­vested and in­clude it in your over­all diver­si­fi­ca­tion plan. Beere says pen­sion funds in­vest in shares, bonds, prop­erty and cash in South Africa and over­seas, so you need to tally that up with your own sav­ings and see where you stand. If you have money in unit trusts you may as­sume it is all in­vested in the stock mar­ket, but there are cash and share unit trusts.

But don’t overdo it. While di­versi f i ed i nvest­ments ar e im­por­tant, you can also spread your risk to the ex­tent that your in­vest­ments are so frag­mented and nu­mer­ous that you find it dif­fi­cult to con­trol.

Beere says that at the mo­ment, i nvestors should be l ean­ing to­wards over­seas shares rather than lo­cal shares – as much as 50% of your shares should be in over­seas shares. If you are young and try­ing to build your wealth, you may want to have a large por­tion of your sav­ings in shares. But if you are older you may want to play it safe and have more cash in your port­fo­lio, says Beere.

Also make sure you are us­ing tax-ef­fi­cient in­vest­ments where ap­pro­pri­ate.

6

CHECK YOUR WASTE

Each per­son has dif­fer­ent spend­ing pri­or­i­ties, so there are no rules on what you should or shouldn’t spend your money on. But make sure your spend­ing is in line with your pri­or­i­ties and that you are not over­spend­ing on some­thing just be­cause your pri­or­i­ties i nclude some­thing lux­u­ri­ous you can’t re­ally af­ford.

You may love hav­ing a nice car, but cars are a big ex­pense. Beere says you should con­sider buy­ing a one-year-old ve­hi­cle. Ask the dealer what the car’s worth is ev­ery Jan­uary and un­der­stand you are spend­ing 30% of that on in­sur­ance, de­pre­ci­a­tion and other costs.

7 DO SOME­THING ABOUT THE BIG TICKET ITEMS

MED­I­CAL:

At the end of the year you are en­ti­tled to look at your med­i­cal aid plan and change it. Look at the pric­ing for next year and give it some thought, Beere says. If one fam­ily mem­ber is sickly you could put that mem­ber on their own plan and oth­ers on min­i­mum cover.

If you use a lot of your med­i­cal aid, you can look at tak­ing out gap cover to cover the dif­fer­ence be­tween what the med­i­cal aid pays and what it ac­tu­ally costs.

ED­U­CA­TION:

Un­less you have been clev­erly pre­par­ing for ed­u­ca­tion costs since the day your chil­dren were born, there is not much you can do about ed­u­ca­tion costs other than to de­cide if you can af­ford the best pri­vate school or the most pres­ti­gious univer­sity and make the tough de­ci­sions ac­cord­ingly.

TECH­NOL­OGY:

The costs of tech­nol­ogy have crept up on us over the years. Sit down and have a tech­nol­ogy re­view of your DStv, in­ter­net con­nec­tions and cel lphone con­tracts and look for ways to con­sol­i­date your spend­ing. There has been a change in how peo­ple use cell­phones, Beere says, and it is worth look­ing at the cost­ing of pre­paid, con­tracts, data and calls. You may de­cide it is worth it to buy a phone for cash and only change the phone when it be­comes use­less. Free phones on con­tract are not re­ally free. You may not be watch­ing DStv much and find it is cheaper to down­load what you want to watch.

IN­SUR­ANCE:

Check t hat your poli­cies are ap­pro­pri­ate right now and check the value of the items in­sured and whether your car has been in­sured at the cur­rent value.

8 MAKE SURE YOU DON’T LEAVE A FI­NAN­CIAL MESS

Read your will and if you are not sure it is still valid, get a fi­nan­cial plan­ner to look at it. Make sure ben­e­fi­cia­ries – of your will and life in­sur­ance – are all ap­pointed and doc­u­mented. If you have a fi­nan­cial plan­ner, these will be on file, but if not, make sure you have a sum­mary of what you own and who the ben­e­fi­cia­ries are.

Make a se­cure f ile of all of your fi­nan­cial as­sets and in­clude copies of re­cent state­ments of your bank, pen­sion fund, short-term in­sur­ance, share ac­counts, unit trusts, ve­hi­cle doc­u­ments and bond in­for­ma­tion.

9

TALK ABOUT MONEY

Many cou­ples only talk about money when it is run­ning out, says Kayle. Now is a good time to look at the year ahead and help one another make good de­ci­sions. It is also im­por­tant to know what you have col­lec­tively; oth­er­wise one per­son may be spend­ing while think­ing the other has saved.

Talk to a f inan­cial ad­vi­sor so that you can turn your springclean into a long-term plan.

10SPRING

IS JUST A SEA­SON

Once you have done the springclean, you should be in a good po­si­tion to know ex­actly where you stand f inan­cially. This puts you in a per­fect po­si­tion to take the in­for­ma­tion you have and work out your longer-term f inan­cial re­quire­ments and goals. Get rid of pa­per­work and make sure your state­ments are be­ing emailed or that you have online ac­cess, so they are easy to track and file and are easy to sub­mit for tax.

Cre­ate a fi­nan­cial cal­en­dar so that you know which big ex­penses – or bonuses – are com­ing and when. And be­fore you get full of Christ­mas cheer, take stock and know ex­actly what po­si­tion you are in with­out as­sum­ing things will change, or that next year will be bet­ter.

Ian Beere Man­ag­ing di­rec­tor of Netto In­vest

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