Here are a few things to keep in mind when it comes to financial planning by brushing up with these five principles. 

Please note: 

The tips that are given should not be seen as financial advice but as a general guideline. It does not take into account your personal financial circumstances; therefore, we encourage you to speak to a financial adviser to help create a financial plan that will work with your financial situation and goals.

Earn

It is all about going back to the basics. Before you can spend, invest, protect or even borrow you will need to manage your ability to earn and maintain your income. Your ability to earn an income is your most valuable asset. Therefore, knowing what your income is and setting a budget to manage it can help you juggle your monthly expenses better without wondering where your finances go to. Keep in mind that a budget is never set in stone but has to be visited regularly and adjusted to make sure that you don't overspend or find yourself falling into the red when it comes to debt.

Spend

A golden rule is to never spend more than you earn. Ideally, you would want to only use 80% of your salary to cover your needs and wants while the rest goes to savings and investments. However, with the current situation most South Africans find themselves in this could be tricky. Seeking financial counselling or advice from a qualified financial planner can help you adapt your finances accordingly without placing a strain on you and your wallet. While setting a budget is the first step, choosing a method that matches your spending habits is equally important. Methods such as the 80/20 rule or the 50/30/20 rule can help you split your finances accordingly to have all your bases covered.

Save & Invest

One of the key pillars to financial freedom is knowing what to save and invest in. It also means that you will need to set financial goals, both short-and-long term, that can help you when the going gets tough. A common mistake most of us make is delaying things such as putting aside money in an emergency savings account, having a retirement policy, saving towards big purchases or even paying off debt. However, the aim is to start small with what you have and gradually build your way to saving or paying off larger sums. It is better to start somewhere small with what you can manage consistently than to never start at all.

Borrow

Understanding the interest rate that comes with a loan or credit and how your credit score impacts your borrowing power can lead to you making healthy money decisions. You may be wondering how the ever-fluctuating interest rate will affect your debt repayments. But, remember that not all debts are created equal, which means the interest rate could affect debt differently based on whether your repayments are linked to a fixed or prime interest rate. Always look for ways to build a healthy credit score and understand how your borrowing will impact you in the future. 

Protect

Do you have a financial plan for your 'what if' moments? The reality is that life is bound to throw unexpected curveballs at us that can leave us and our loved ones reeling financially. Making sure that you have policies in place that will protect your income and way of living is vital. Make sure that you have your basis covered with things such as having a medical aid cover in place, disability cover, income protection, life cover, funeral cover, and a retirement cover. This doesn't mean that you will need to have all of these at once but aiming to build your way to having all covers in place can protect you from life's 'what if' moments.