Are your finances in a bit of a shambles after the holidays? We can all relate to that. But were they in shambles before the holidays?
Most of us are in the same boat when it comes to our finances. It feels like a sinking life raft most of the time and we don’t know whether to bail out water or patch holes.
This is an ongoing struggle and will continue so if we do not change our personal finance habits.
Following these rules for personal finance could help you sort it out for good and keep it that way.
Take action – It is good to do research about organising personal finance, but not acting won’t solve your problems. Jump in head-first and start small. Commit to spend time every day to sort through your finances and get a plan of action into place. It could be as simple as writing down your monthly expenses and debt to assess where you are.
Pay off credit card debt – This is probably the biggest short-term debt most people have. Interest rates are high and monthly payments eat into your disposable income. Try to pay off the biggest debt first and work your way down to the smallest ones. And the big test is to not use them unless you can pay off the whole amount every month. Once paid off, the monthly premiums can be used to invest in retirement, or a dream holiday find etc.
Distinguish between wants and needs – This is a tough one. Wants are luxuries that we don’t need to survive. Schedule your wants into your budget or save up a bit every month so you have a want fund for when you see something you want to purchase, but only if the fund allows it. Do not use your credit card for want purchases.
Live on less than you earn – Your expenses every month should not exceed your income. Do a proper assessment of your monthly outgoing expenses. This should include your savings and investments. If you are barely making ends meet, then it is time to start cutting on some non-essential expenses. Alternatively, find ways to supplement your income through a second job or small business.
Pay yourself first and save - Before any monthly expenses, set aside 10% for yourself. This should not form part of the monthly spend budget. Set up a direct deposit into a separate account. Use this 10% to invest or save.
Set financial goals - Think about and create financial goals for yourself, short and long-term. Things to work towards such as, saving for a car, buying a second investment property to rent out, or retiring at 60. You can only set goals if you know what you want.
Be responsible for your decisions – It is important to get financial advice on money matters, but ultimately what you do with your money is your responsibility and your decision. Don’t let someone else decide how your money is to be used.
Protect your finances – Make sure your assets are protected in case something happens to you. Take out short-term insurance and life insurance to protect your assets such as your home, and your family.*
Follow these steps and you should be back on track with your finances in no time at all. Your deVere Acuma adviser can help you get a plan of action in place to sort out your sinking lifeboat of personal finance. [email protected]
Please note, the above is for education purposes only and does not constitute advice. You should always contact your deVere Acuma adviser for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.