The pinch of electricity and food costs as well as an increase in the interest rate is not helping efforts by young people to manage their money properly.
Janine Jacobs, head of financial reporting at Glacier by Sanlam said: Breathe and take time to really look into your finances. That’s the first step to help you plan for what needs to be done to get you where you want to be".
What is financial freedom?
While financial freedom means different things to different people, Jacobs shares four things that mean financial freedom.
– Being in charge and taking ownership of your finances.
– Having cash flow to live the life you want.
– You can pay bills and manage unforeseen expenses.
– Long-term planning, a rainy day and retirement.
What is you financial personality?
According to Jacobs, there are five personalities that have different approaches towards money.
| Big spenders | This financial personality is not the bargain hunter instead they are fashionable and want to make a statement. |
| Savers | Savers only shop when necessary and very rarely use their credit cards. |
| Investors | This personality type is very conscious about money. They have an understanding of their financial wellness and try to make their money work. |
| Shoppers | Shoppers develop a strong emotional satisfaction from spending money. The cannot resist the temptation to spend money, even if it’s on items that they don’t need. Some shoppers are aware of their addiction and have concerns about debt. They can also look for bargains and are happy when they find them. |
| Debtors | Debtors generally don’t spend a lot of time thinking about their money. Therefore they don’t keep track of what and where they spend their money. |
Here are eight steps to help you take your financial power back:
1. Know you current financial situation
By confronting your current financial situation, you can get closer to where you want to be. It’s important that you create a list of all of your creditors and where you have saved money, such as retirement savings.
Important questions you need to ask yourself are:
– How much have I saved?
– How much debt do I have?
– What do I need and for what purpose?
– Who do I owe money to?
You should check out organisations like the Credit Bureau or Credit Report SA if you want to know about your debts or check your credit score.
2. Change your approach to money
Jacobs said that money is just not to pay for food and clothing. Instead it is a tool that will help you achieve your dreams, live a stress-free life and reach the ultimate goal of financial freedom.
To change your approach to money, you need to determine your motivation to make money, so you can shape your financial goals.
“Whatever your motivation, managing your money today gets you closer to your goals,” Jacobs said.
3. Monitor your spending
Know what you spend your money on, and don’t fall into the trap of spending unconsciously.
Instead of buying a cappuccino every day or spending your money on something that is on sale, think about whether you really need that item in the first place.
You can use your bank’s app or any other budget app to track your spending.
4. Pay yourself first
Jacobs said that the perfect spending ratio is as follows:
20% – Pay yourself first.
30% – Housing which includes rent, bond payment, utilities.
50% – Everything else such as school fees or groceries.
“Paying yourself first means putting away money before anything else is paid. It’s allocating money for a rainy day, saving for something or settling debts, Jacobs said.
5. Spend less
This seems simple enough, but it needs to be filtered in your biggest and smallest financial decisions.
When spending, you need to think of whether what you are buying is something that you want or something that you need.
Jacobs said: “Buying less means you have more money to save. You’ll also learn that you can have a happy, fulfilling life with less stuff.”
6. Buy experiences, not things
Jacobs said that you should try as much as possible to spend your money to improve your outlook on life or change your perspective for the better. As an example, travel (not products) can do that.
7. Create a side hustle
If your debt is more than your income, create another stream of income.
She said: “Creating another income stream requires sacrifice and hard work and needs to be managed so that it doesn’t impact negatively on your active income or create a conflict of interest.
8. Pay off your debt
When paying yourself first, you should focus on paying off your debts.
Jacobs said there are two approaches when paying off debt:
Snowball – paying off the smallest debt first.
Avalanche – paying off the debt with the highest interest rate first.
“However, if you choose to approach managing your debt, it’s a big step closer to taking your financial power back,” Jacobs said.
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