Tips on taking control of your money

16 Aug 2012

As women become more educated and financially independent, 68 percent of South African women are better at handling finances than their mothers were.

Taking control of your money is easier once you have set out clear goals of what you want to achieve financially.

This is according to the Old Mutual Savings Monitor July report, which reveals that of the 39 percent respondents with regard to financial vulnerability in partnerships, women in particular were said to be very vulnerable, pointing to fear of not being able to cope financially if their partner leaves them.

In the previous article, we spoke about financial planning for women and not using a man as a financial plan.

Read the article here.

On women specifically, the report notes that wealthier respondents were better planners and more prepared to get their ‘hands dirty’ when dealing with finances, have a longer savings and planning horizon, are more likely to save and are keen to learn more about finances.

Women in the lower income category had short-term horizons and focused on the 'now'.

Although this group is less confident and more likely to be confused or intimidated by all things financial, they are also hungry for knowledge and financial education.

Whether you are a wealthy financially savvy woman or you are battling to make ends meet at the end of the month, you are not alone.

South Africa did not escape the effects of the global economic recession and this saw many people cutting down costs dramatically to keep up with the cost of living.

The report reveals that 29 percent of the survey respondents are more careful with their finances, they budget, they think carefully before spending and when they do spend, they buy what they need.

Some took it further, 15 percent closed store accounts and credit cards and they buy with cash. They have realised that interest charged on credit is way too high.

Interesting enough, none of the respondents did this a year ago. I call it, taking control of your money. Upon realisation that there is a problem, you find a solution and act on it.

Sylvia Walker, financial guru and marketing development manager at Old Mutual South Africa says in many instances, women lack self belief in their abilities, and as a result, women tend not to spend time working on their finances.

Taking control of your money is easier once you have set out clear goals of what you want to achieve financially.

This could be buying a new house, a new car (the one your parents gave you when you finished varsity may be falling apart) or saving for retirement.

Walker gives simple yet practical tips on how to take control of your finances.

Don’t waste money, budget. This allows you to monitor how much you spend and on what.

Here are some of the tips to help you get started:

1. Face your realities

If you cannot afford it, do not buy it. Keeping up with the neighbours will only plunge you deeper into debt if you are not careful.

Cut down on expenses that you can actually live without, such as paying for DStv premium which costs R590, rather choose a cheaper option if you can afford it or cancel it altogether.

A monthly DStv premium at R590 costs R7 080 a year, so think about saving that amount annually.

2. Stop waiting for Prince Charming

Instead of depending on a man for all your financial needs, earn your own money.

3. Plug the holes

Don’t waste money, budget. This allows you to monitor how much you spend and on what.

4. Tackle your debt

There is good debt such as home loan and a car to an extent, provided you are not spending too much on the car seeing as cars are not assets but liabilities.

Bad debt includes credit cards and store cards, but if managed properly credit cards are useful as long as one does not continue to pile on debt one cannot afford to service.

If you have read everything you can to get you started and are still not sure how to actually control your money, speak to a professional for help.

5. Seek professional advice and have a financial plan

If you have read everything you can to get you started and are still not sure how to actually control your money, speak to a professional for help.

It could be a financial advisor and your bank could be a starting point.

You also need to have a financial plan which includes having a valid will, medical cover, an emergency fund, funds to protect your income in case of retrenchment as well as saving and investing.

Investing

Walker explains that consistently investing one’s money is important. Some people invest on a short, medium to long term, but whatever it is you are investing money for, set yourself realistic goals.

Whether you choose to invest in unit trusts, gold stocks or listed property, diversification is important.

Never put all your money in property for example because if the market takes a nose dive, you may lose all your money.

Understand what you invest in and ask for help or use the help of a financial advisor for guidance in choosing the best investment vehicle for you.

If you cannot afford it, do not buy it. Keeping up with the neighbours will only plunge you deeper into debt if you are not careful.

The Old Mutual report reveals that people earning less than R6 000 per month were saving more money than people earning more – 23 percent of their income went towards savings, 14 percent serviced debt.

Of the people surveyed, 22 percent were saving towards buying a home, 20 percent (car), 35 percent (retirement and old age), 39 percent (emergency expenses), 6 percent (to start a new business), 17 percent (home improvement) and 17 percent (to pay debt).

Investing should also be part of your financial plan and its time (how much your investments are for) and not timing that matters.

Encouragingly, 63 percent of the respondents are aware of the importance of saving but do not have money, 81 percent are always trying to become more knowledgeable about financial matters, another 81 percent said they would avoid debt whenever possible, 67 percent will not buy anything until they have enough money and 81 percent will set financial goals, according to the report.

Achieving financial freedom

Walker says getting to a financially comfortable place is possible – it’s all about planning and believing in yourself.

Whether you choose to invest in unit trusts, gold stocks or listed property, diversification is important.

Think of it this way, if you wanted to lose weight to fit into that little black dress, you will do everything possible to look and feel slimmer and sexy.

It’s not very different with financial freedom, you want to be happy throughout the month and for the rest of your life without sleepless nights on how to pay for the bond, school fees etc. - budget and look at ways to cut expenses and save, save and save some more.

Here’s how to get there:

1. Take control of your money

2. Have clear and concise goals regarding your finances

3. Don’t run scared when markets dip

4. Continue investing through thick and thin

5. Invest with the right partner

6. Be disciplined in your approach

7. Believe that you can do it

“You can achieve anything you put your mind to, just believe in yourself and your abilities,” adds Walker. – Denise Mhlanga

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