• Jaco Prinsloo

How to tame your finances to regain control of your money

Credit, combined with bad spending habits, means many South Africans find themselves living from payday to payday, but you can free yourself from bad spending habits and take control of your finances, says Jaco Prinsloo, certified financial planner at Alexander Forbes.

A recent survey conducted by Debt Rescue shows that 85% of all South Africans need help either financially, emotionally or both as a result of the Covid-19 pandemic. But this does not have to be the case if you follow these simple steps:

1. Budget

You can’t manage your money if you don't know where your money is going.

When was the last time you calculated how much you spend? The first step in getting your finances under control is getting a clear picture of how much you make and spend and should be saving each month. Knowing where your money goes will give you a clear picture of what you are doing well and what needs to change. But, before you make any changes, you need to decide what you want your finances to look like.

2. Set a goal

Without a goal to aim for you will never be able to reach your dream lifestyle. Set short-term goals like reducing your debt and setting up an emergency fund and long-term goals like saving for retirement. Some goals will have an end date like a planned holiday, and other goals will be a lifelong endeavour – such as staying out of debt. Having goals allows you to take maximum advantage of opportunities, keeps you on the right path and helps you say ‘no’ to short-term spending temptations.

3. Match your lifestyle to your income

Credit cards and debt make it easy to move your lifestyle from dreams to reality. Most big expenses resolve around our home, transport and entertainment. And this is also the area where it’s the easiest to overspend. Instead of overextending your finances and getting into debt, move to affordable housing, buy second hand, entertain at home and buy in bulk. Once you get your expenses under control, you can start thinking about how you are going to afford the dream lifestyle without the debt.

4. Create a spending plan for your money

Financial planning basics promote spending 50% on housing and living expenses, spending 30% on wants and luxuries and saving 20% of your income. Making a few small changes to your spending habits can have a large impact on your finances. A few easy changes include:

  • Don't give in to your children’s demands

  • Cancel all unused subscriptions

  • Buy no-name or house brands

  • Use a shopping list and stick to it

  • Negotiate fees and interest rates

  • Switch to cash, not credit, purchases

5. Move from fear and stress to discipline and gratitude

Don't let money stress you out. Being fearful of money will prevent you from reaching your financial goals. Some of the fear comes from not knowing what to do. There are multiple resources available online which will allow you to the opportunity to educate and empower yourself. Once you have a better understanding of your finances you can set up a plan on how you are going to manage your money, what steps you are going to take to pay off your debt, and to start saving for your future. Speaking to a certified financial planner will help you get a clear picture and take control of your finances to give you the confidence to make better spending and investment decisions.