It's a complicated relationship. Sometimes we get each other and succeed in flourishing, but other times it's an uphill struggle that makes you wonder if you will be able to make it to month-end.
Your money relationship is a constant journey that requires understanding and patience to reap the fruits of your labour. But how do you go about building your finances in a way that is beneficial to you? Here are four tips to help you change your relationship with money for the better.
Don’t let fear rule your relationship with money
Operating from a place of fear when it comes to money can lead to fear-based decisions that can cause you to set unrealistic goals. For example, saving money and having an emergency account that can cover at least 3-6 months of you not receiving an income is a wise move.
However, saving as much money as possible to the point where you are unable to cover basic things such as entertainment, buying new clothes when you need to or replacing items can cause you to blow whatever budget you have set.
It is also easy for people to make poor money decisions out of fear, such as joining pyramid schemes or questionable investments to grow their money.
Spending money you don’t have
A handy tip to remember that can help you improve your relationship with money is to not spend money that you do not have in your bank account. Even if you were promised a payment, avoid spending money that has not landed in your bank account.
According to World Wide Worx, 76% of South Africans run out of funds before month end. This is where creating a realistic budget can help you curb any need to spend money on things you do not necessarily need or borrow funds to cover your expenses which can easily lead to a debt trap.
Cutting back on things you do not need
Debt is currently a major problem that many South Africans face, but the problem is that instead of the debt decreasing it is increasing. As many as 57% of South Africans end up borrowing money to cover various expenses. A total of R2.2 trillion is owed by South Africans which translates to a median of R40,000 being owed per person.
A common mistake that people make is taking on more debt instead of making means to reduce their debt. The goal is to contribute what is affordable for you each month towards reducing the debt, instead of not paying anything.
Speaking to a financial advisor can give you a better picture of what you can cut back on so that you reduce your expenditure and use your finances effectively to pay off whatever debt you may have accumulated.
Investing in things you need
As the adage goes, "You need to spend money to make money." Unfortunately, there are no short cuts to making money that will last you forever, which is why making smart investment moves matter.
Having basic things such as life insurance is a start, but it is equally important to make investments that will make your money work for you. Retirement plans are equally important.
Our financial situations differ which is why it is important to seek professional advice from a financial advisor who will be able to direct you on how to use your money to build your investments.