There is no better time to do a financial health check than at the beginning of a new year, says Louw Rabie, Chief Financial Officer at Sygnia Asset Management.
There is no better time to do a financial health check than at the beginning of a new year, says Louw Rabie, Chief Financial Officer at Sygnia Asset Management. Here are his five wealth tips to make 2016 a better year.
Many people use their bonus to clear credit card debt. It is a great idea, but think about the year ahead. Are you going to fall into exactly the same pattern again? Imagine having a windfall you don’t have use for debt repayment! If you don’t have the willpower to keep yourself from overspending, rather reduce the credit limit on your card. Better even, if you don’t need it, deactivate your credit facilities and close unnecessary credit and store cards. If you have to use credit to buy something, it is possibly a sign that you can’t afford it.
Take stock of your spending habits, there must be some behaviour you can change to save more. For instance, think how much extra you spend on cappuccinos and buying meals for lunch. Let’s say you usually buy four takeaway coffees a week at R15 each. You could save R60 per week or R240 a month if you were to forego these. Now add the muffins, bagels and doughnuts and you will save significantly more. You can decide to prepare your daily lunch at home. Every rand adds up to an extra amount you would not have had. This should definitely have a positive impact on your financial well-being and health.
Salary increases often occur at the beginning of the year, decide in advance to increase your retirement savings or bond repayment with the same percentage. If you don’t, it will probably feed into your lifestyle and will make no difference to your wealth building in the longer term. You don’t have to spend every last cent you earn.
January is generally a quiet time and before the year rushes ahead, commit yourself to updating all of your policies. Review your short term insurance – the insured amount should be at the replacement value, which is what it would cost you, at the time of a claim, to replace all your belongings with new ones. Remove old items that no longer need to be insured. Your car also automatically loses value as it ages and your insurance should be adapted accordingly. Also update your long term insurance policies. Are your life cover and disability cover still adequate? If not, it should be adjusted to meet your and your family’s needs. The beneficiaries on your policies should also be amended to take into account any relevant life changes such as marriage, death, birth or divorce.
Budgeting is essential for your financial health. You should be aware of how much money came in and how much was spent or saved. It is best to assess your finances very critically to save yourself from more financial trouble in the future. If you haven’t drawn up a budget yet, it is the perfect time to plan for the year ahead. If you already have one, consider how it should be changed to reflect your income and financial responsibilities for the year ahead. The rule should be not to spend more than your income. Instead, try to save more and avoid relying on credit or personal loans to cover expenses.