If you’re already regretting the financial excesses of the holiday season, now is the time to make some firm resolutions and get onto a sound financial footing in 2018.
While January usually means the gym is uncomfortably full and cigarette sales are probably down, Lizl Budhram, Head of Advice at Old Mutual, believes that you should absolutely make money-related commitments part of your 2018 self-improvement pledges.
“New Year’s resolutions often focus on habits that affect your physical health, and we tend to neglect or postpone tackling our financial challenges. Our reluctance to commit to goals like achieving financial independence or improving our financial security probably has something to do with the fact that they are regarded as more long term – or less attainable. But the truth is that following simple and sound financial advice and sticking to a sensible plan can really pay off - with tangible results within 12 months,” she says.
To help jumpstart your journey to financial health, Budhram shares her easy-to-use checklist:
WRITE DOWN YOUR FINANCIAL GOALS
Think about where you’d like to be in 12 months with regards to your money. Be as realistic as possible. Your goal may be to be debt free, or build a comfortable emergency fund or save enough for an international trip in 2019. Identify two or three goals that you will commit to tackling in 2018. Make sure they’re SMART goals – Specific, Measurable, Attainable, Relevant and Time-bound.
JANUARY IS THE BEST TIME TO ACT NOW
When you’re facing a cash crunch the most important thing is to recognise the problem and do something about it immediately. Ignoring it won’t make it go away and will almost certainly make it worse.
MAKE A POINT TO PAY OFF ANY FESTIVE SEASON DEBT
Eliminating short-term debt should be a priority - especially at the very beginning of the new year. This type of debt usually carries high interest rates, which means it can quickly grow and become unmanageable. One of the worst things about bad debt is that it prevents you from growing wealth.
“More than 40% of credit-active South Africans are over-indebted according to the National Credit Regulator’s Credit Bureau Report. This means their accounts are over three months in arrears or have default judgments against them,” says Budhram. “As much as possible, avoid taking on further short-term debt, and be particularly wary of high-interest store accounts.”
BUDGET REALISTICALLY, TECHNOLOGY CAN HELP
Last year, 52% of South African metro working households found that, at least once, their income did not cover their living costs. “This is because people often fail to see the bigger picture, opting rather to manage their expenses day-by-day. Luckily, there are apps available that make budgeting easy,” Budhram points out.
22seven, for example, offers a free personal financial management app that helps users manage their money by linking accounts, automating budgeting and bundling transactions to give a holistic view of their spending.
KNOWLEDGE IS POWER - GET FINANCIALLY SAVVY
Financial literacy is not just about budgeting and saving; it’s also about understanding complex financial topics so that you can ask the right questions. Thanks to innovation, affordable mobile devices and the decreasing costs of mobile data, you can take advantage of platforms like Old Mutual’s Moneyversity that empower you to make better financial choices through practical videos, calculators and articles.
PAY YOURSELF FIRST
Oprah wasn’t joking when she said that the first thing you should do with your salary each month is pay yourself first. Provided your debt is under control, and you are not defaulting on payments, starting to build a savings stash is the first step to your next phase – wealth building.
When your immediate financial affairs are under control, you need to start thinking about longer term savings and investments. Once you have some idea of what you can afford, ideally between 10% and 15% of your net income, consult a reputable financial adviser about drawing up a financial plan.
“Unlike some other New Year’s resolutions, improving your financial wellbeing is not a once-off action. It requires constant work and commitment,” Budhram says. “But while this may seem daunting, an accredited financial planner can help you get a better understanding of your financial goals and help you develop a long-term financial plan to achieve them.”
Download your Financial resolutions checklist.