What’s your fi­nan­cial ac­tion plan?

If life handed you some lemons in 2018, 2019 is the right time to make lemon­ade

Saturday Star - - | AFFLUENCE - GEORGINA CROUTH | [email protected]

IT’S A new year and a new you, or rather, it could be. If 2018 felt a tad chaotic, 2019 needn’t be. Take charge this year of your fi­nances and write your own story on a “blank slate”.

With the World Bank pit­ting lower global eco­nomic growth, a VAT hike on the hori­zon, plus a likely dou­bling of the fuel levy, (if the Road Ac­ci­dent Ben­e­fit Scheme is signed into law), it’s not likely to be smooth sail­ing.

It’s time to bat­ten down the hatches and “project man­age” your fi­nances to re­duce ex­penses and in­crease sav­ings, to set you up for a bet­ter fi­nan­cial fu­ture.

Think about where you can save money and cut costs. This may mean a crit­i­cal eval­u­a­tion of where and how you live – whether you eat out, go on hol­i­day or what car you drive. Think about your choices, pref­er­ences and ac­tions.

BUDGET

Dur­ing tur­bu­lent times, it’s more im­por­tant than ever to keep track of your ex­pen­di­ture. Write down your monthly in­come and ex­penses: rent or mort­gage bond pay­ments, in­sur­ance pre­mi­ums, med­i­cal scheme con­tri­bu­tions, school fees, staff salaries, gro­ceries, and any other amount that has to be paid. Fac­tor in in­creases that come at var­i­ous times of the year, such as se­cu­rity com­pany li­cence re­newal fees and ve­hi­cle li­cences.

De­vel­op­ing the right fi­nan­cial mind­set starts with your ap­proach to money – how you spend and whether you save. Do you budget? Do you bar­gain shop? Make Lemon­ade, a personal fi­nance com­par­i­son site, ob­serves: “Your men­tal­ity drives your spend­ing and sav­ing habits. When you fo­cus more on the bot­tom line, you will be on your way to save money for the long term.”

Draw up a budget and cre­ate an ac­tion plan. How will you man­age your pref­er­ences and choices with the money you have? Re­fine es­ti­mates with ac­tual costs, and mod­ify your ac­tion plan to fit your life­style and re­al­is­tic budget, it sug­gests.

22seven, by Old Mu­tual, is a free budget plan­ner that helps you to man­age your money bet­ter. It al­lows you to cre­ate a budget, track your spend, in­vest at low cost – or tax-free. It’s a great way to stay on top of your ex­pen­di­ture: see how much you’re spend­ing on eat­ing out, at the su­per­mar­ket, and on those quick-shop jaunts.

SAVE

Set­ting goals not only helps you to save money, it also teaches dis­ci­pline. “Pri­ori­tise sav­ing with a con­cept known as ‘pay your­self first’,” says Vera Nagte­gaal, the ex­ec­u­tive head of in­sur­ance web­site Hippo. com. “This means that be­fore you spend any money, you should put a pre­de­ter­mined per­cent­age of your salary aside – in a sav­ings ac­count or a unit trust – so you can gain the ben­e­fits of growth.”

She em­pha­sises the im­por­tance of sav­ings as a buf­fer against un­ex­pected ex­penses, and you should ide­ally have three months’ salary saved up in an “emer­gency fund”, as well as other sav­ings plans for short- (one to two years), medium- (two to five years) and long-term (fu­ture and re­tire­ment) goals.

“Don’t be de­terred if you haven’t man­aged all those dif­fer­ent types of sav­ings – rather start with a small amount, such as a cou­ple of hun­dred rand each month, and work your way up to big­ger bal­ances,” says Nagte­gaal.

RE­DUCE YOUR DEBT

Pay off any out­stand­ing debts as quickly as pos­si­ble. Pop­u­lar meth­ods are the avalanche method (debt that at­tracts the high­est in­ter­est rate is paid off first) and the snow­ball method (pay­ing off your small­est debts first).

DON’T SKIMP ON PRIORITIES

It’s “Junuworry” and “tweeps” (a per­son’s fol­low­ers on Twit­ter) are mak­ing light of re­vers­ing debit or­ders. But it’s no laugh­ing mat­ter if you re­verse debit or­ders for in­sur­ance poli­cies and se­cu­rity. Con­sider the fi­nan­cial knock if your car was stolen – or worse, you crashed into an­other car – or your house was bro­ken into and your house­hold con­tents weren’t cov­ered. It’s a set­back from which not many can re­cover. Nagte­gaal says it’s im­por­tant to have in­sur­ance poli­cies in place to pro­tect you and the fam­ily: house­hold and car, and life, dis­abil­ity and fu­neral cover.

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