There’s nothing more satisfying than starting off a new year with no financial pressure. It may seem impossible but financial freedom as easy with wise spending habits.
Far too many consumers live on credit; people spend far too much than they make. That lifestyle is unsustainable because sooner or later our debt catches up. Here’s something to consider: shouldn’t you stop spending money you don’t have?
Sugendhree Reddy, Head of Personal Banking at Standard Bank, suggests the following tips as your 2015 financial new year’s resolution.
Make 2015 prosperous
Resolve to make 2015 a year of financial prosperity by understanding and tackling your spending habits.
Budgeting will help you in knowing your financial status, as you can work out how much you are left with after all the fixed monthly instalments are paid. It’s important to prioritise the expenses while drawing up your budget as well as:
• Sticking to the budget once it has been drawn up. This will help control your spend.
• Deciding on how much money you can afford to put away in a savings account every month to cover unexpected events. Savings are important as they help with unexpected financial emergencies or other things you love to do.
• Allocating a percentage of your income that you can afford to spend on paying off loans to decrease the amount owed.
Pay debt off
Begin the new year with a mission to free yourself from debt. Pay off all your accounts and enjoy a year in which there is money left at the end of the month, rather than the traditional ‘too much month left at the end of your money.’
In paying off your debt, focus on reducing the largest amounts first. This saves the greatest amount of interest which, again, can be used to pay off other, smaller debts.
Debts should be paid off according to the interest rates that are payable on them. It is best to pay off short-term debt first, as these attract higher interest rates.
It helps to:
• Make a list of all your debts.
• Identify those with the smallest balances and highest interest rate.
• Put together a plan to pay the debt with the highest interest rate first.
• In the case of store cards, continue to pay the minimum amount due and where you can pay a little extra, do so. This will ensure your good credit profile is unaffected.
Manage your credit rating
Using credit wisely can work to your advantage if you are dedicated to paying your accounts on time. Every organisation that lends you money, or has a financial arrangement with you, will check your credit history before they extend the loan or service. If you pay your bills on time, you will have a good credit score and it should be easier for you to secure a loan. However, if you miss payments, or pay your bills late, your score may look a little bleak, and the bank will be more reluctant to lend you money. Make 2015 the year dedicated to understanding your credit score. It’s a convenient way of tracking your credit health and whether it is improving.
Seek expert advice
Having a plan in place and making the right choices in life is important, especially when it comes to money matters that could impact your life. It’s important to remember that you don’t have to do this alone.
The beginning of the year is an ideal time to seek advice from a financial consultant who can assist you. They have the financial education, research tools and industry know-how to ensure that the various stages of your life are considered and financially catered for. They will also be able to identify short-, medium- and long-term investments.
Ultimately, the aim of a good financial planner is to ensure that you can meet planned financial challenges and eventually retire without having to sacrifice the standard of living you may have worked for years to achieve. It’s important to realise that successful planning means regular meetings to discuss changing personal needs and market influences.
Don’t incur more debt
I’s tempting to borrow again, especially to pay off your debts. Debt isn’t always a bad thing. Without it most families could not afford to buy a house or a car. The thing to remember about debt, though, is that it’s extremely expensive. What must be considered is what the debt is for and what it can add to your life.
If you find yourself in a position of spiralling debt, visit your bank. Be honest about your financial position and there may well be a solution to help you.
