7 steps to start money journey
FIRST STEP: IT ALL STARTS WITH SETTING YOUR FINANCIAL GOALS
Effective planning puts mechanisms in place to help you realise your dreams.
Managing your personal finances is about more than just drawing up a budget and saving for a rainy day. It’s about achieving a balance between protecting your greatest asset (your income) while at the same time building your wealth.
Here are 7 steps to help you start your financial journey right:
The first step is to set goals and objectives. There is no one-sizefits-all, and every person’s goals and priorities are unique. To simplify the process, it is often easier to separate your goals into different categories such as retirement goals, saving and investing objectives, risk protection goals and estate planning goals.
The next step is to draw up a budget. Not all goals will be instantly achievable, and a budget will help you to manage cashflow, prioritise your goals and channel your money towards those goals that are important to you.
Once you have analysed your goals in respect to your risk – considering what would happen in the event of your death, disability or ill-health – the next step is to consider solutions. There are many insurance companies in SA and the choice can be overwhelming. If you have a need for insurance cover, your financial advisor will prepare costings from at least three different insurance companies for you to consider.
It is important to understand the difference between good debt and bad debt before embarking on a debt reduction strategy. Good debt, such as a low-interest student or home loan, is debt that is required to pay for big-ticket items that one would not otherwise be able to afford.
If you have accumulated debt through credit cards and shop accounts, embark on a strategy to eliminate your unsecured debt.
The next step is to create an emergency fund to protect yourself against unexpected, highcost events.
Inevitably, most people will find themselves in a position where they have to pay for something like a burst geyser, new tyres or an expensive vet bill. In the absence of an emergency fund, you
Once you have taken advantage of the tax deductions afforded by a retirement fund, such as an RA, it makes sense to invest any additional surplus income rather than leave it in a bank account. Vehicles that can be used for these purposes include tax-free savings accounts, endowments (for those in a tax bracket above 30%) and unit trusts.
Devon Card is a director at Crue Invest