Managing our finances in tough economic times can be stressful as we face rising inflation and higher costs of living.
We often find ourselves feeling uncertain and anxious as we try to ensure we can meet our financial responsibilities and still live day to day.
Even the concept of managing our own funds can be overwhelming, says Karmen McDonald from Sanlam Indie.
To help, she shares seven tips:
1. Create a budget
Budgeting is the foundation of financial success. You can start your budget by tracking your income and expenses to get a clear picture of your financial situation. Then you can allocate your money wisely, making sure that you sort out your necessities and savings with room for your discretionary spending.
2. Tackle your debts
It is essential that you tackle your debts head-on. You can pay off your debts by adopting one of these approaches:
- Snowball method – paying off the smallest debt first
- Avalanche method – paying off the debt with the highest interest rate first
3. Build an emergency fund
Life can be unpredictable, so having an emergency fund is crucial to take care of any unexpected expenses.
Bertie Nel, head of financial planning and advice at Momentum says you should aim to have three to six months’ worth of expenses saved in your emergency fund.
You can start your emergency fund by setting aside a small portion of your income each month.
4. Start investing early
Even if you can only save a small amount, McDonald says you should start investing as early as possible and then let the power of compound interest take over. This will allow your money to grow over time.
“Do some research, explore different investment options, and consider seeking advice from a financial advisor to make informed investment decisions.”
5. Plan for retirement
While retirement may seem far away, it’s never to early to saving for that stage of your life. People should consider opening a Retirement Annuity Fund (RAF) or a Tax-Free Savings Account (TFSA) to start building their retirement savings.
McDonald explains that these accounts offer tax advantages and can help you grow your money over the long term.
6. Protect your loved ones with life insurance
Thembisa Mapukata, general manager of tied distribution at Old Mutual Mass and Foundation Cluster, says a life insurance policy covers any outstanding debts and takes care of important purchases that the family may need to make in the future. It also gives families an income for a certain period of time.
Life insurance is an essential component of financial planning. Consider getting a life insurance policy or an income protection policy to protect your loved ones in case of an unforeseen event.
7. Understand personal finance
Take the time to educate yourself about personal finance. Read books, follow reputable financial blogs, listen to podcasts, and attend seminars. You can also speak to your bank if your require any information or guidance on taking care of your money.
The more you know, the better equipped you'll be to make informed decisions about your finances.
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