Tips on grow­ing up fi­nan­cially

BE­GIN CUL­TI­VAT­ING NEW, EF­FEC­TIVE HABITS What­ever you fi­nally de­cide, al­ways re­mem­ber The Three Com­mand­ments.

The Citizen (KZN) - - PERSONAL FINANCE - Mduduzi Luthuli 1. What went well this year? 2. What did not go well this year? The Three Com­mand­ments In­come Sav­ings Re­tire­ment in­vest­ing

Grow­ing up fi­nan­cially in­volves break­ing old un­wanted habits and cul­ti­vat­ing new and ef­fec­tive ones in­stead. The flaw in our think­ing is that when we think about wealth, we think about it in terms of money. Peo­ple who earn a sub­stan­tial amount of money are con­sid­ered wealthy.

We tend to for­get most peo­ple are de­pen­dent on their job alone for their high in­come, a job from which they might be fired, only to be left with mount­ing bills and grow­ing debt. Real wealth is cre­ated from as­sets that gen­er­ate reg­u­lar pos­i­tive cash-flow.

The best place to start is to put to­gether a fi­nan­cial plan, or if you al­ready have one, drag it out of the bot­tom drawer and get to work on up­dat­ing the num­bers to fit your current sit­u­a­tion. There’s no quick fix, but build­ing wealth can be done. It just takes time and ef­fort. Plan­ning your fi­nances means you can start to get ahead. A fi­nan­cial plan also helps you to manage life events such as buy­ing a home, hav­ing kids, pay­ing for ed­u­ca­tion, or plan­ning for re­tire­ment, with­out hav­ing to sac­ri­fice the fu­ture that you want.

The right fi­nan­cial plan can help you min­imise the bad, make the most of the good times and pro­tect against the un­ex­pected. The idea is to cre­ate a road map for the year ahead – not a rigid daily sched­ule, but an over­all out­line of what mat­ters to you and what you hope to achieve in the next year.

In the be­gin­ning of the year there was doubt. To be­gin the process, ask your­self two ques­tions and try to come up with at least six to eight an­swers to each:

For these an­swers, you should be mostly in­ter­ested in events you had con­trol over. If some­thing hap­pened that you couldn’t pre­vent or con­trol, it doesn’t need to go on the list. It’s also im­por­tant to re­mem­ber that all an­swers should be – S.M.A.R.T – Spe­cific, Mea­sur­able, Achiev­able, Re­al­is­tic and Time Tar­geted.

– Has it been grow­ing or fall­ing? Putting a tar­get in­come fig­ure down on pa­per that you wish to achieve in the year ahead will fo­cus your mind and al­low you to con­sider what steps and ac­tions you need to put in place now to reach your in­come tar­get.

– What is your current level of sav­ings and how is it struc­tured? Sav­ings should be pri­mar­ily fo­cused on emer­gency sav­ings for im­me­di­ate use dur­ing un­ex­pected events. Tar­get a sav­ings amount equiv­a­lent to three to six months salary.

The idea is to cre­ate a road map for the year ahead.

– How much progress did you make on this in the last year? Or was it an­other year in the trenches with lit­tle time spent plan­ning for your in­evitable re­tire­ment?

Hav­ing both per­sonal and fi­nan­cial goals can help you plot a path to the fu­ture and can give you the mo­ti­va­tion you need to sac­ri­fice now to help make your ul­ti­mate dreams a bit more achiev­able.

Mduduzi Luthuli is the di­rec­tor at Luthuli Cap­i­tal

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