Five ways to fast-track your financial freedom
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Being financially free means that you have enough savings, investments and cash to afford the lifestyle that you want for yourself and your family, according to Consolidated Wealth director and advisory partner Colin Long.
Long said: “And the truth is that most South African’s suffer from ’stuffitis’. We buy things we don’t need with money we don’t have to impress people we don’t like“.
The result is that many people live with more debt than they can afford and become hamsters on a wheel, working harder and harder to maintain momentum because if they slow down, we will be unable to maintain their lifestyles.
“Treasury estimates that only 6 percent of South African’s will retire on a liveable income. These findings are based on a survey of more than 15 million economically active people with a monthly income of over R8 000. That’s really concerning as it confirms that debt is a national issue, a very real problem across our entire society,” Long said.
Long recommends a five-step process that will give people the structure to attain financial freedom:
1. Start a budget
The first step towards financial independence is setting a budget. Be ruthless and separate needs from wants. Include all the regular expenses such as bond or rental costs, utilities, credit card bills and other loans as well as groceries and school fees. Once you’ve got a realistic budget in place, stick to it.
2. Pay off your small debts first
List all debts from the largest to the smallest and include the interest being paid for each debt. Then make a plan to pay off the smallest debt first and then tackle the next smallest debt and then the next. It may seem strange that you pay off the smallest debt first but this will give you a psychological win that will keep you on track.
3. Create a financial plan
Speak to a financial planner. Their first goal will be to put together a plan that protects your income and provides cover for your family. Make sure you are working with a Certified Financial Planning Professional (CFP®) as this will ensure you will get good financial advice.
4. Draw up a will
Your next step is to draw up your will. If anything happens to you, this will help your family as there is a clear set of guidelines about how your assets should be distributed.
5. Start saving for your retirement
You can now start working with your financial planner on your retirement plan. Ideally, you should consider saving 10 to 15 percent of your income for retirement and your adviser will tailor a plan that’s attuned to your circumstances.