2023 has been a tough financial year as consumers and their finances have been stretched to the max.
Following a year of interest rate hikes, increases, and decreases in the cost of petrol as well as the high costs of food and electricity, consumers have been struggling with how to manage their finances.
Here are three ways consumers can manage their finances:
More and more consumers have been relying on debt to take care of their expenses and make ends meet. Instead of getting stressed out by your increasing debt, people should look at different ways that they can pay off their debts.
A closer look at two methods people can use to pay off their debts:
– Snowball method: List all your debts from the smallest amount to the largest, and then commit to paying the minimum repayment amount for each debt.
– Avalanche method: The avalanche method is when you pay off the debt with the highest interest rates - such as personal loans and credit cards, first.
Many people like to live in the moment, but they also forget about their financial future, including what happens when they reach the age of retirement and are no longer receiving a pay cheque.
With advancements in medicine, people are living longer, which means that they need to have enough money saved up for retirement.
Some things you should keep in mind when saving for retirement:
– Start saving for retirement and start as early as possible, even if it is a small amount every month.
– When changing or quitting a job, people should transfer the money saved in their company retirement fund to a preservation fund or retirement annuity, where it can continue to grow.
– Speak to a financial adviser so they can ensure that your investment portfolio in your retirement fund or savings matches your risk profile.
– Don’t draw from your retirement fund too early because the longer you delay drawing an income from your retirement savings, the greater your chances of being able to cover your expenses when you retire.
A budget can help you plan your finances for 2023, make sure you are financially stable for the rest of the year and set you on the right path on your financial journey.
Here’s what you need to keep in mind when drawing up your budget:
Figure out your income by working out the net income (after tax) of everyone that contributes financially to your household and including the extra cash you make from your side hustle.
– Separate the expenses into two categories: fixed costs (rent/bond, school fees, insurance, etc.), discretionary costs (entertainment, fuel, clothing, transport, etc) and savings—money that you are putting aside towards a savings goal.
– Start an emergency fund to help if an unexpected financial crisis happens. People need to have at least three months’ salary saved up in an emergency fund.
– Have your financial priorities to stop you from making a mistake that many people make: buying things that you don’t have the money for.