Seven steps to freedom

The most recent Old Mutual Savings & Investment Monitor found an alarming 40% of respondents said they have no form of formal retirement savings. You can start to make a difference to your own personal finances by taking seven essential steps.

1. Draw up a monthly budget.

Drawing up a budget is a simple process, and basically gives you an instant indication of what you’re spending your money on, helping you identify where you can cut costs.

2. Pay off your most expensive debt.

Reduce the debt that costs you the most interest, e.g. store cards.

3. Consider your long-term goals.

Saving for retirement is your most important longterm savings. By starting to save early you have a longer period in which to invest, so you can take advantage of compound interest.

4. For the medium term, save towards an emergency fund, monthly.

This will avoid you having to go into debt if unexpected situations strike. Ideally, emergency savings should be kept in a separate account to discourage you from dipping into it. Instead of using a savings account at the bank, why not explore investing in a tax-free savings account

5. Protect against loss of income due to death, disability and illness.

Also consider protection against medical expenses and short-term insurance for your assets.

6. Plan for short-term goals.

Maybe you plan on travelling soon or perhaps you’d like to buy a new car?

7. Draw up a valid will.

Your will is a record of how you want your assets to be distributed among your loved ones and how your liabilities should be paid for. A valid will is an essential element of estate planning and includes everything you own and owe – from cars to investments.

Speak to a financial advisor about developing a financial plan that’s relevant to your needs, to live within your means today while still providing for your future.

Lizl Budhram is head of advice at Old Mutual Personal Finance.