Striking your financial sweet spot is a balancing act that needs frequent revisiting. Financial literacy can be beneficial for everyone, but where do you start without being left with more questions than answers?
What can you do to improve your financial situation and avoid breaking the bank while you are at it? We have put together a handy guide on how you can get started.
Do a financial health check
Before beginning your financial education, it is crucial to do a financial health check. This means looking at where you are currently in terms of your finances. Speaking to a financial advisor can make this process easier.
Look at your bank statements for the past 2-3 months to see how you have been managing your finances. Re-assess your budget in terms of what is worth keeping and where you are bleeding financially. It will require honesty to assess where you are to help you move forward.
Start setting financial goals
Not having a plan of where you want your money to go to is the easiest way to waste funds and fall into the debt trap. According to the Debt Counselling Association, 10 million South Africans have bad debt.
Having financial goals can help you better assess what financial product will be most beneficial for you to reach your goal. It will also help you recognise how you can use good debt in the form of credit that comes with a good interest rate to assist you in healthily reaching your goal. Remember to track your finances to avoid accumulating more debt than you can manage.
Avoid buying with money that’s not in your account
The quickest way for your finances to spiral out of control is using money that you do not have. It can be in the form of spending small amounts daily with the promise that you will pay yourself back later or making a purchase in hopes that you will get finances later to pay it off.
Sometimes things cannot go as planned, throwing a major spanner in the works when it comes to your finances. Always plan your expenses and do your best to stick to it. Use a credit card to complement your budget. It's better not to purchase items that are out of your budget. Rather save towards it whenever possible.
Evaluate your financial products
Comparing your options is vital. Before taking out a policy of any form, credit card or loan carefully read the terms and conditions. Look at the interest rate and calculate if it will be affordable in the long run.
If you are not sure how this works, you can always ask what it means or to have it explained to you in a way that you understand before signing your name on the dotted line. Try review this frequently to see if you are still getting value for your money.
It’s your journey
Always remember that this is your journey. What will work for one person may not work for you. It is also vital to acknowledge your blind spots when it comes to managing your personal finances. Doing this can help you avoid comparing your financial situation to the next person and also getting help from an accredited financial advisor.