Financial fitness starts with you

Putting some money aside for savings is even harder, but if you want to realise your dreams and retire well, then saving for tomorrow is exactly what you need to start doing today.

John Manyike, head of financial education at Old Mutual, says that the government is under increasing pressure to balance its own budget. The country has a debt of R2.2 trillion, which is the equivalent of 49% of GDP. This makes any significant increases in the level of social grants or pensions for struggling South Africans highly unlikely.

“It is therefore important not to rely solely on the government pension for your retirement, but to start saving as early as possible to ensure that you can maintain a reasonable standard of living when you do stop working.

“Old Mutual’s Savings and Investment Monitor also reveals that one in three South Africans believe that the government will look after them when they retire.”

He adds that consumers need to get creative about stretching their income. Cutting down on indulgences such as eating out in restaurants or buying clothes on a store card that has a high interest rate, or even packing your own lunchbox instead of buying takeaways, will go a long way towards enabling you to save a little extra each month.

He points out that even a small increase in the amount that you put away each month can make a huge difference over time, thanks to the power of compound interest.

Manyike believes the key to achieving financial fitness is to live within your income and not your credit limit.

* Five tips on how to create financial well-being

1. Face reality. Face the facts:

For some this will be a tough task. Open all your bills, review your bank statements and request a credit report from one of the credit bureaus. You are entitled to a free credit report once a year, in your birth month. This will give you an idea of what your credit profile looks like and alert you to any negative listings your creditors may have registered. Most credit bureaus have call centres. Try one of them.

2. Set your goals and stay committed:

Determine what your goals are and set financial objectives for the short, medium and long term. Goals must be realistic to be achievable.

Prioritise goals in order of importance. Estimate how much you need to save for each and settle on a time frame.

Be emotionally connected to your goals as this will keep you disciplined during difficult times, such as the festive season and holidays, when you may be tempted to overspend.

3. Determine your needs honestly:

Cut back on lifestyle expenses that you can do without and then use those savings to pay off debt. If you eat out in restaurants once a week, decide as a family to reduce that to once a month. The money saved will help you settle debts or save for your children’s education.

Before you spend money on ‘nice-to-have’ items such as home decor, expensive shoes or a new car, ask yourself if it is a need or a want. Don’t spend on unnecessary items when your goal is to destroy debt.

4. Stay focused on tackling your bad debts:

Pay off your most expensive debt first.

Your credit cards or store cards generally carry higher interest rates than your bond, for example.

Consider consolidating all your debt into one loan to replace multiple interest charges, service fees and debit order fees with one consolidated payment. The benefit is that the debt-free date is clear – and we all love to see the end line and feel a sense of satisfaction when reaching a goal. However, be warned that the zero balance on your credit card and store cards may tempt you to spend. Resist this temptation!

5. Budget. Budget. Budget:

There is a lot of wisdom in saying, ‘If you can’t measure it, you can’t manage it.’ Your budget will help you to live within your means, so it is vital that you record all spending. If you want to reach personal financial freedom, a budget is invaluable. Keep your eyes focused on your goals and be disciplined about staying on course. If need be, change your friends to better your chances of sticking to your budget.

Manyike concludes: “Whether you are determined to start planning for retirement or saving for a new home or children’s education, consult an accredited financial adviser. Today’s the day to seek great advice and then put it into action.”

Also read: financial freedom Archives