If you’ve ever trained for an athletic event, you’ll know that getting fit can be a challenge. For most of us, it’s tough, it’s time-consuming and it demands that you’re quite strict in order to get to where you want to be. Some days will be easier than others, so you need to constantly remind yourself that each workout is a step in the right direction.
Improving your financial fitness is much the same. Sure, it’s less sweaty but it also requires a fair amount of time and calls for you to commit to improving your financial behaviour so that you can achieve your financial goals. Every spending decision you make has an effect on your overall financial wellbeing, which is why it’s so important to flex your money management muscles every single day.
Start by taking a look at where your money is going, explains Edwin Theron, CEO at digital insurer Sanlam Indie. “When we take an honest look at our financial habits, many of us might not like what we see, which, understandably, can make managing your money intimidating. But when you really unpack the numbers, you’ll identify spending ‘trends’ that can help you to improve your current financial situation,” he says. One shouldn’t be discouraged by what you uncover when you take a closer look at your financial situation, notes Theron. In fact, he believes that this knowledge should motivate you to make better decisions going forward.
Theron gives the following tips to help you take control of your finances today.
Create a budget… and stick to it
Coming up with a monthly budget is essential if you want to reach your short- and long-term financial goals. Start out by calculating your monthly income and then tally up your monthly expenses, both fixed and variable. It’s a good idea to spend a few months tracking these numbers so that you can get an average of how much money you’re spending on different things, like food, entertainment and petrol, for example. But just creating a budget is not enough. Armed with this spending information, you need to keep track of your financial activity so that you can actually stick to the budget you’ve created.
Identify and eliminate unnecessary expenses
While reviewing your income and expenses to create a monthly budget, you’ll probably spot a few areas where you’re spending more than you’d like to. While it’s unlikely that you’ll be able to cut down on certain fixed expenses, like rent or car insurance, there will probably be some room for you to reduce your variable expenses. Something as simple as buying takeaways less often can make a big impact in the long-term.
Update your insurance
Protect your finances by having the right insurance policies in place. Insurance is all about managing risk; from homeowner's insurance and medical aid to life insurance and income protection, all of this cover is designed to help you handle unexpected expenses. While you may be tempted to skimp on insurance, you’ll be glad you have it if things go wrong because it is designed to ensure that a crisis doesn’t ruin you financially.
Prioritise savings
If you tend to spend more than you should, consider automating your savings and making sure that your savings go off at the beginning of the month, not the end of the month when funds are usually running low. This will help you maintain financial discipline. As part of your saving strategy, it’s a great idea to have an emergency fund that you can dip into if/when any unexpected expenses arise.
Get financial advice
Many of us don’t have the time, the knowledge or the inclination to manage our finances. Fortunately there are a host of tools, products and content available these days that help to demystify personal finance and many of them are very easy to follow. If you aren’t a DIY type when it comes to finances, enlisting the help of a financial adviser is a great idea. These people have the understanding and expertise to offer advice and help you reach your financial goals.
Achieving financial wellbeing is less about how much you earn and more about what you do with your money daily, monthly and yearly, notes Theron.
“When you’re trying to improve your financial situation the trick is always to remember that your current financial behaviour has a really big impact on your future financial health, so start with that budget.”
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