Are you one of the many South Africans whose finances are in shambles? It may be time to take charge of your financial health. A Sanlam survey of over 1,000 South Africans found that “almost a fifth of respondents had no savings to speak of. An overwhelming majority (54%) could not make their money last until the end of the month”.
A statement released by First National Bank (FNB) in 2021 revealed that most of its 10.5 million (South Africa 8.7 million and Rest of Africa 1.8 million) customers, only a fraction would survive a financial emergency.
“Our internal research found that less than 7% of ETF clients have enough money saved to cover living expenses for three months if they were to suddenly lose their income,” said Ester Ochseproduct manager at FNB Money Management.
Given the uncertainty of these times, it’s important to make sure your finances are in order. Here are some ways to start taking charge of your financial health.
Really look at your finances
Talking about money can be uncomfortable, however, you won’t be able to take charge of your finances if you have no idea what’s going on with your money. Instead of guessing and estimating, taking the time to review our expenses, debts, and income can give us a clear picture of the things we need to work on to improve our financial health. Expense tracking apps can be a lifesaver in this regard. You can also view your bank statement for the past few months and find out where your money is going. It will be easier to make adjustments when you are not in the dark.
Limit frivolous spending
Unless you were born a trust fund baby, chances are you work hard for your money. Spending it on your heart’s desires can feel like a reward. However, spending your hard-earned money on frivolous things such as going out too much, partying, wearing designer clothes and other non-essential items could put you on the path to poor financial health.
Pay off your debt
South Africans are drowning in debt. According to South African Reserve Bank in 2020 “Household debt to income in South Africa increased to 77.10% in 2020 from 72.80% in 2019”.
Spending on credit can be dangerous because of the interest rate. Not only will you have to pay for what you used, but you will also have to pay additional interest. Paying off as much debt as possible will limit the amount of interest you have to pay, giving you more money in the long run. The secret is to start with your smallest debt and work your way up. Experts call it make a snowball. Another method is called avelancher, this means paying off the debt with the highest interest rate first. Do your research to find out what is best for you.
Save Save Save
Savings can seem overwhelming at first. As the African proverb goes, the best way to eat an elephant is one bite at a time.
“There is a common misconception that it takes a lot of money to create an emergency fund. It is simply not true. The key message is that it’s good to start small. Contribute R10 or R100 when you can. What’s important is to start,” says Farzana Botha, Segment Manager at Sanlam.
Call a few reputable financial service providers to get an idea of the savings plans available. In this way, you will be able to choose the one that suits your needs.