Money is often viewed as a sensitive, challenging and even intimidating topic.

Although some financial terms may seem a bit too complicated, understanding how they work and impact your personal money journey can change your life.

Empowering yourself financially is crucial for the improvement of your personal finances, as well as the achievement of both your short and long-term goals.

Experts Mapalo Makhu and Lumka Khaile shed light on financial concepts and fundamentals of money management that will help you revamp your finances.

Firstly, understand your money story

The manner in which we view and spend money is linked to the financial behaviour we witnessed while growing up.

“Our parents or caregivers have influenced our personal relationship with money, whether for the good or bad,” says money coach Lumka Khaile.

“This is your money story, one which you are still writing today as an adult.”

Khaile’s holistic approach to personal finances focuses on the individual, their beliefs, emotions and relationship with money.

“When you have acknowledged your triggers and habits around money, the next step is to take action by creating healthy money behaviours and to remain consistent,” she says.

Know your why

When setting short and long-term financial goals, Khaile warns against having a motivation that is solely linked to an amount.

“Apart from having SMART financial goals, they need to be rooted in your values, this is your why. It needs to be a strong why – it’s not about the amount, but also about the value behind the amount.”

Saving and investing: know the difference

Talk of the importance of saving for a rainy day is very common.

On the other hand, investing is also hailed for its benefits.

So, what exactly is the difference between the two and where should you take your money?

“Saving is more short-term (usually 12 to 24 months). For example, you are saving for a holiday or to build up your emergency fund. It will probably be in a normal bank account where you’re earning just minimum interest,” says author and award-winning personal finance expert Mapalo Makhu.

“On the other hand, investing is much more long-term,” she says.

“You are investing for your future. It could be investing for retirement or for your children’s varsity fees. You can buy shares and unit trusts, knowing that the higher the risk, the more long-term returns you’ll get.”

Simplifying shares and equities

Investing in shares and trading equities has become increasingly popular and more accessible to ordinary South Africans over the past few years. It is important to find the kind of investment that works best for you.

When it comes to becoming a shareholder or investor, Makhu suggests starting small and simple until you’re knowledgeable and comfortable enough to take bigger financial risks.

“One of the easiest platforms to use is the Easy Equities platform,” she says.

“If you are a little bit more advanced or you have a bit more money, and you’ve educated yourself on how all these things work, most banks have share trading platform too”.

Winning the fight between good and bad credit

Not all credit is horrible. Sometimes, credit can serve the purpose of increasing your wealth or improving your income overtime. Knowing the difference between good and bad credit (and avoiding bad credit) can transform your finances.

“What a lot of people do is buy things that they just don’t afford, and then they get in financial trouble,” says Makhu.

She further warns against the use of credit for the maintenance of a certain lifestyle.

“A lot of people are suffering from bad debt. So, here we’re talking about overdrafts and personal loans. People are living way beyond their means and they’re financing a certain type of lifestyle through credit. People get into debt just so they can look good to their friends and go out. That is horrible, bad credit.”

In case of an emergency

Life is very unpredictable. Should you encounter a situation that requires an immediate financial response, it’s great to have funds available.

Makhu cautions against the use of credit for emergencies.

“Let’s make it very clear. Your credit card is NOT an emergency fund. It cannot be an emergency fund because it’s credit. What happens when you can’t pay it back?”

While the benchmark usually set for an emergency fund is 3 to 6 months of your living expenses, Makhu recommends the less intimidating approach of starting with what’s small and doable.

“Start with what you can. Create a goal for yourself. If it’s R2,500 at the end of two months and it’s something you’ve never done, then that’s something you should do and be proud of. Once you reach that goal, you can improve from there and increase the amount.”

Revamp your finances

Lastly, money coach Lumka Khaile recommends the following steps in order to revamp and redirect your finances:

1. Evaluate whether your current income is leading you to your desired income goal.  If you aren’t satisfied with the response, explore different ways to increase your income;
2. Eliminate unnecessary expenses and overspending by setting clear expectations of your expenses throughout the year; and
3. Make the most of your tax saving opportunities by utilising the services of a good tax consultant.