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Start the new year by making better financial decisions

By Faeza
03 February 2017

EVERY year, we are all probably guilty of making numerous resolutions and setting ambitious targets that we barely keep. But one can be forgiven for that; we are human

after all. Apart from your health, striving towards financial independence is one of the most crucial resolutions that one cannot afford to dishonour. The thought of financial independence in 2017 might have crossed your mind as the year starts.

AVOID DEBT

Financial experts say you should get into the habit of budgeting, saving and ridding yourself of debt, which will come in handy as you shape up your finances. Preenay Sathu, channel head at FNB Financial Advisory, says a change in one’s financial behaviour

goes a long way. He says you need to draw up a list of things that burden your wallet and yet are not a priority. These may include downgrading on the car you drive so that

you can free some of the money towards your saving goals or retirement. You should also avoid more debt. “Only borrow when you need to and avoid falling for the temptation of what lenders offer you,” says Preenay. “Rather focus on reducing debt and using any

surplus cash to increase payment towards your home loan or saving for your children’s education.” Review your investments to ensure that they yield your desired returns, advises Preenay.

HAVE A BUDGET

Danelle van Heerde, the head of advice processes and tools at Sanlam, shares this view.

“Draw up a realistic monthly budget,” says Danelle. “Your bank statement shouldn’t be your budgeting tool. Many transactions happen in your bank account within the first few days after pay day. But many people aren’t even sure how much goes out of their bank accounts. When some transactions aren’t deducted immediately you may continue to spend money that’s no longer yours if you don’t have a budget drawn up.”

FINANCIAL SLAVERY

To counter this, Danelle advises people to live within their means. “If you can’t afford to pay cash for something, you probably can’t afford it,” says Danelle. “If you use your credit card to pay for ‘nice-tohaves’, it is likely that you are living beyond your means. And if you use your credit card to pay for basic needs such as food and school fees, then you really

need to scale down your lifestyle. Don’t overextend yourself. If you are buying a car, consider all running monthly costs, not just the monthly instalment.” People need to reconsider their approach to saving, says Danelle. Instead of saving what is left of their

income, they should spend what is left after saving. Danelle adds that consumers should pay their expensive debt first to avoid paying more on interest. Credit cards, clothing accounts and personal loan debts are likely to be the most expensive. She suggests that people should try cheaper alternatives for the things that they are accustomed to.

“For instance, if you eat out with your friends every weekend, you could replace some of these with an evening at someone’s house where everyone brings a dish or a course,” says Danelle.