At the beginning of the New Year most people set resolutions for themselves. The most common resolution among many individuals regarding their finances often revolves around wanting to be in a better financial position than the previous year. The new year presents the perfect time to assess your finances in order to gain control and aim to develop and stick to a budget for the year.
While it is great to create a list of financial goals, it is only helpful if you stick to it. By taking charge of your personal finances you will empower yourself to save more and also be financially prepared for any unexpected expenses that might occur.
Below are some tips on how to be financially savvy in 2017.
CREATE A BUDGET FOR YOUR LIFE
When you create a personalised budget, which involves reviewing your income and expenditure, you will be able to build a financial road map to help you stay on track, especially during tough times. If you are not able to track where your salary is going, it is impossible to manage your money effectively. The best way to do this is to use a spreadsheet to track your monthly spending by calculating fixed monthly expenses to determine the amounts left for saving, investing, paying off debts, essential living expenses and entertainment. Saving and investing will eventually lead to a higher net worth over time and will assist you to achieve your financial goals.
MANAGE YOUR DEBT
Problems arise when debt spirals out of control and credit repayments increase every month. Individuals are urged to not spend money that they do not have on unnecessary items. Sticking to this will ensure that their debt load is manageable. There are differences between good and bad debt, as a mortgage for a house is good debt while paying thousands of rands on expensive clothing is bad debt. People need to understand that some level of debt is a practical necessity, but they should never allow credit repayments to increase to an unaffordable amount.
SAVE FOR THE UNEXPECTED
At some stage in your life, you may experience an unexpected event that may impact your finances. This could include anything from a motor vehicle accident, illness, job loss, disability or big medical expenses or even damages to property from natural disasters. While it is advisable to have insurance in place to cover unexpected losses, sometimes there are events that insurance simply cannot cover or there may be additional costs excluded by the cover. This is why it is always beneficial to have emergency savings in place to ensure that you will not be financially crippled should something unexpected happen.
In addition to your budget, it is a good idea to make provision for your estate planning. This is a very important factor in financial planning that can sometimes be forgotten.
When making financial plans for the new year, just remember to take it one step at a time in order to make sure that this year you make some real progress in your financial journey.
It might also be a good idea to speak to a financial planner to provide assistance and guidance throughout this journey.
Author: Tiffany Boesch CA(SA) is group financial director of PPS