Start your financial year off on the right footing
You're likely to be happier with a grip on your finances
The start of the new year represents a chance to better manage various aspects of our lives, especially our financial wellbeing. Here are three key goals to strive for in 2020.
For most of us, the start of the new year represents a chance to start over and better manage various aspects of our lives. Other than the goal of living a healthier physical life, many of us often commit to leading better financial lives.
This would involve drawing up a plan, setting out priority areas and then having the discipline to see it through for 12 months. So, what practical steps can you take to better manage your finances? And are there any key areas to focus on to meet your objective of leading a fulfilling financial life?
One financial goal which should be a priority in 2020 is to improve your understanding of money management. This includes building your knowledge on how debt works, learning about the importance of retirement planning, the difference between saving and investing and a basic understanding of financial services.
This is an ongoing goal that should be relevant to everyone regardless of your bank balance or debt situation. Listed below are three key goals we can all resolve to be striving for this year.
- Focus on paying off your debts
The most important number for anyone looking to take on debt or who is already in debt, is your credit score. People who have better academic scores will typically have more opportunities open to them in the labour market. Likewise, people who have better credit scores will have greater and cheaper access to credit markets.
One of the best ways to improve your credit score is to always pay all your debts on time. Paying off more than the minimum balance also helps you eliminate accounts quicker. You can do this by focusing on the accounts that charge you the highest interest rate or the ones with the largest outstanding balances.
- Develop a savings habit
Most banks make it easy for you to save by freely providing an automatic savings tool. This works by allocating a small rand amount to a savings account every time you swipe your card. To complement this option, you should also develop the discipline of saving for financial goals like holidays and big purchase items. If you do this right, you will limit the number of times you have to borrow money.
In 2020, we will all have varying degrees of unplanned financial issues or crises. The best way to prepare for these unforeseen circumstances is to have money regularly set aside that will not be used for any other reason except for emergencies. This works better if you do not have easy and same-day access to these emergency funds.
- Think long-term
Having a long-term perspective requires a deliberate strategy to invest in the following areas:
- Retirement. We will all stop working one day, and most South Africans do not save enough for this period in their lives. If your employer does not offer a pension plan as part of your remuneration, you can start putting money away into a retirement annuity. Do your research and speak to a financial adviser for guidance on what would work best for you.
- Education. The most important investment that you can make is an investment in knowledge and education. This accelerates your chances of career and personal development, leading you one step closer to a healthier financial life.
Research shows that people who have a better handle of their finances also tend to be in better physical health, they typically stress less and are generally happier. While you are setting new year’s resolutions for more gym time and better mental habits, do not neglect your financial life. Happy New Year!
* Siwundla holds the Financial Manager Risk qualification and is the investor relations and product analyst at CoreShares