We all need to start taking control of our finances by budgeting, investing and building financial security – and there’s no better time to do this than ahead of a new year!

The last quarter of the year is an appropriate time to plan your finances for a successful and stable 2020.

STEPS TO TAKE TO PREPARE:

Don’t leave financial decisions to your partner

Leaving all the crucial money moves – such as taking a bond, buying insurance, planning for retirement, long-term investments and making a will – is asking for trouble! These decisions should be regularly discussed between you (and your financial consultant, if necessary), agreed on and regularly reviewed, especially at times like the festive season, when extra expenditure looms. You and your partner also need to agree clearly on who pays for what in the home.

 

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The last quarter of the year is an appropriate time to plan your finances for a successful and stable 2020.

STEPS TO TAKE TO PREPARE:

Don’t leave financial decisions to your partner

Leaving all the crucial money moves – such as taking a bond, buying insurance, planning for retirement, long-term investments and making a will – is asking for trouble! These decisions should be regularly discussed between you (and your financial consultant, if necessary), agreed on and regularly reviewed, especially at times like the festive season, when extra expenditure looms. You and your partner also need to agree clearly on who pays for what in the home.

If you’re planning to get married, an antenuptial contract must be agreed on beforehand. Getting married in community of property puts severe limitations on your financial independence and can also backfire catastrophically, since you share not only your assets, but also your debts – regardless of who incurred them.

Studies show that women drive 70-80% of all consumer purchasing, but lag behind males in terms of long-term investments.

Put the power back in your hands and take on the responsibility of knowing the ins and out of your family finances. Remember the sound advice of American journalist Clare Boothe Luce: “A woman’s best protection is money of her own”!

Reflect

Choose a day on which to review your finances, armed with the following:

  • Bank statements
  • Payslip
  • Insurance policies
  • Investment statements
  • Pension/Provident fund statements

Use this time to draw up a realistic budget and to calculate your net worth. Use the formula Net Worth = assets – liabilities. This shows whether you’re building wealth (when your assets are worth more than your liabilities) and, if not, which areas of your spending need to be curtailed.

Write down your goals for 2020

Your financial goals for 2020 need to be SMART (specific, measurable, attainable, realistic and time-bound).

If, for example, you want to get out of debt, write down exactly how to do so. For example: “From January 2010, I will pay an extra R500 per month towards my debt so that by 30 November, I will be debt-free. I will also not use my credit card until that date.”

Or, if you want to build wealth, write down: “By 1 December 2020, I will have increased my investments by 15%. I will do this by buying shares/unit trusts/buying a property” or whatever your plan is.

The goal you set for yourself must include which steps you need to take to achieve it.

Educate yourself financially

“Money without financial IQ is money soon gone,” wrote Robert Kiyosaki in his best-seller, Rich Dad, Poor Dad (Plata Publishing). Financial IQ equips you to make better money decisions and helps you distinguish good investments from scams. Enrol for a course in personal finance management or start reading books explaining techniques of successful budgeting.

Once you’ve taken these steps, do the following:

Have an emergency fund

An emergency such as illness, an accident or household breakages can land you in severe financial difficulty. Having an emergency fund covers you for such situations without capsizing your entire budget. Put regular amounts into this fund as soon as you’re paid each month and consider the money untouchable.

Your emergency fund should be in a liquid or easily accessible bank account (preferably one with a decent interest rate). A notice account or a money market account is the best option here.

Pay off debts

Debt like personal loans, credit cards, overdrafts, etc steadily erode your income due to high interest rates and can mount frighteningly easily, unless you exercise discipline in settling them. Remember, only once you’re debt-free does the money you’re earning actually belong to you.

You can either choose to pay off debt with the highest interest rate first, or opt for the ‘snowball method’. According to Investopedia, this is a debt reduction strategy whereby you pay off the smallest debt first, while also paying the minimum amounts required on all other debts. Once the smallest debt is paid off, you proceed to the next-largest debt (adding to your payments the amount you were paying to settle the smallest one). You continue this way until you’ve cleared all your creditors. Knowing you’ve settled a debt is great motivation to continue and if you stick to this plan religiously, you’ll never be overwhelmed by what you owe and will be able to extricate yourself from debt far more quickly than by haphazardly paying creditors whatever’s left over in your budget each month.

Know your retirement benefi ts If you’re employed, your employer might have a pension/provident fund. Familiarise yourself with the benefi ts due to you. Studies show that only about 16% women in South Africa have enough to retire comfortably! Ask your human resources manager or benefi ts manager to explain your pension/ provident fund clearly to you and, if necessary, consult a fi nancial advisor to see whether you’ll be receiving enough to retire on comfortably when the time comes.

Start putting money in the market

Investing can seem intimidating at fi rst, but – provided you make educated choices – it’s not diffi cult. First ask yourself: “What am I investing for?” (Remember, investing is a longterm decision, as opposed to a short-term saving vehicle.)

You can invest in them via companies like etfSA, CoreShares, Sygnia and on the Easy Equities platform. Should you want to invest in shares, you can do so on the Easy Equities platform as well. However, buying shares requires a considerable amount of money and a lot of knowledge of the stock market. Either use a reputable stockbroker or fi nancial consultant, or enrol for a free investing workshop at the Johannesburg Stock Exchange. For further information, visit: www.jse.co.za

Start off by investing in a tax-free savings account (TFSA) with an asset manager. TFSAs are a great investment, since all your returns are tax-free. You can contribute a maximum of R33 000 per year into a TFSA. This means that over 15 years, you’ll have contributed about R450 000. With compound interest, that amount has the potential to become a very signifi cant sum.

Then invest in exchange-traded funds (ETFs), which are low in cost. ETFs are listed investment products that track the performance of a group or “basket” of shares.

Think, once, twice and three times before buying

With our country in the throes of one of the most severe recessions it’s ever experienced – and likely to worsen further before it begins improving – this isn’t the time to plan luxuries like overseas trips, new vehicles, impulse purchases or huge festive parties over the holiday season. The craving for what we see and covet can easily be satisfi ed by something much smaller instead. Instead of reaching for your store credit card for that gorgeous (but unnecessary) designer handbag, settle for a cappuccino instead. Then congratulate yourself on your good sense and go home guilt-free – and solvent!

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