These days money is a rare commodity. More and more people are not making ends meet. That means more household debt to add to an already gloomy local economy. Although most of us are in serious financial trouble, we don’t have the luxury of easy access to looted funds… like so many of our duly elected public representatives!
An instinctive urge may be to throw up the hands in disgust or hunt around for those lucrative Fair Go casino coupons no deposit offers. In reality there are sensible ways to get out of a financial pickle. Read on if you need money management tips to help you through what is going to be another trying year for cash strapped consumers.
Create a household budget
Before you even try and cut back on your spending, it’s vital to know exactly where you can trim the fat. The only way you can really identify where your monthly salary is going to is to write down all your expenses in black and white and compare the total figure with that of your income.
When we mean expenses, we mean all your actual costs… not just fixed monthly expenses like rates and taxes, medical aid and insurance contributions, school fees and bond repayments. Make a realistic note of what you spend on average on nights out on the town, brand apparel, lunches, entertainment, petrol and other travel costs, mobile data, food and other consumables and personal grooming products and services.
Then, on another page or spreadsheet calculate how much you can afford to spend on luxury items once you have covered the grudge or essential expenses listed as fixed monthly costs. Once you’ve arrived at a figure, you can then allocate a portion of what’s left over to all those non-essential items you think you deserve.
That unfortunately is where you can make the changes you need to make in order to live within your means. If you have to use your credit card or a personal loan to pay for those added little pleasures in life, you’re heading straight for financial purgatory… and possibly even hell!
Pay any surplus into your home owner’s bond
If you do have any cash left over at the end of month and you can do without that pair of designer jeans, trendy haircut or 5-year-old single malt, put it straight into your bond. The quicker you pay off your mortgage bond, the less interest you’ll be charged and the more cash you’ll have at the end of the day to splash out on all those lovely little things you’ve denied yourself and your family.
There’s no better feeling than having a bond-free property long before the agreed term is up. That doesn’t mean you have to cancel the bond. In fact, if it’s an access bond, we strongly recommend you keep the account open by paying a nominal monthly amount in service fees.
Price check your medical aid and insurance costs
The medical aid and insurance industries are competitive. That means you should shop around for the best possible deals based on the benefits you and your family require. We recommend you do a price check at the beginning of every year… you’ll be surprised at how much you can save on car and householder’s insurance.
The same applies to your medical aid contributions. But if you find all the jargon and benefit structures a bit confusing, you can always get hold of a medical aid broker and ask for advice. It’s free and they can find the appropriate level of cover at a more affordable rate.
It’s worth remembering that you can also downgrade to a cheaper medical aid option and opt for gap cover instead – it really is the most cost-effective way to cover medical costs in-hospital. The day to day healthcare expenses are usually easy enough to cover from your own pocket.
Purchase a pre-owned motor vehicle
If you’re in the market for a new car, avoid the temptation of buying one out of the box. Motor vehicles are deteriorating assets that start losing value from the moment you drive them off the dealership floor. Buying a low mileage pre-owned car that’s around three years old and in good condition is a far smarter idea.
It will also save you at least a third of the new car purchase price and at that age, the vehicle will still be under the original manufacturer’s warranty… so it’s a win-win situation all round.
Don’t chase the stock market
If you’ve invested funds in units trusts, bonds or shares listed on the local stock market, don’t be reactive to the market upturns and down turns. These sorts of investments show the best returns over the long-term, so be prepared to stick with your investment strategy for at least five years. Remember, if you do sell shares or even switch funds within the same investment company, you’ll have to pay capital gains tax on your profits!
Be smart about your investments and diversify. In other words, don’t put all your eggs in one basket. A good strategy is to have a third of your money in cash, a third in real estate and a third in the market. The best investors also have around 5 to 15 percent of their portfolio invested in gold bullion – sovereign coins or bullion bars!