Many people who feel despondent about their financial affairs think there’s only one solution to the problem: go into denial. But if you throw away bank statements without opening them or dump unpaid accounts in a bottom drawer your financial woes are bound to be compounded. Organising and simplifying your finances can save time and money in the long run. You’ll also have a better idea of your financial position and how to organise your affairs.
STEP ONEGather all documents lying around your home, including accounts and policies, and file them in one place. Ensure you have certified copies of important documents such as passports and birth certificates and they’re kept in a safe place such as a personal safe. Ensure family members know where the documents are kept, especially your will. Certain documents must be kept for five years for income tax purposes. These include proof of your retirement annuity contributions, IT3(b) certificates issued by banks and other institutions as proof of interest or dividends earned, and documents supporting claims for medical or travel expenses. Also keep a separate file for guarantees and proof-of-purchase slips. Keep track of all unpaid and paid-up accounts. Many South Africans are blacklisted because they neglect to pay bills, especially medical accounts. There’s no need to hoard every scrap of paper though; keeping unnecessary paperwork leads to chaos.
STEP TWOMake a list of your assets, ensuring you have all the supporting documentation. If for instance you changed jobs years ago and your pension was transferred to an annuity make sure you have proof of the investment. The same applies to old bank accounts that were never closed, Sanlam and Old Mutual demutualisation shares, and policies you’ve taken out over the years.
STEP THREEDebit orders are a way of enforced saving and help you avoid penalties for late payment. Where possible arrange automatic payments for your bond, insurance, fixed monthly expenses and investments such as a monthly payment for a unit trust or savings account. You should save at least 15 per cent of your income after tax and your monthly pension and provident fund contributions have been deducted, says Phillip Hattingh of Dynamic Wealth. If you’re in debt this money can initially be used to pay off your debts.
STEP FOURSwitch to internet banking. This way you’ll save on the cost of stamps and cheque charges, and find it easier to keep a record of transactions. Also complete and submit your income tax return online by making use of the SA Revenue Service’s eFiling system. It’s free, tax calculations for your return are done automatically online, repayments are speeded up and you can opt to receive SMS or email notifications. Register at sarsefiling.co.za.
STEP FIVEClose unnecessary accounts. Every bank account attracts costs and with credit cards you could pay more than R100 in annual fees. Even though it costs you nothing to keep open an unused store account it increases the temptation to make unnecessary purchases and means you’ll end up with more junk mail in your post box. The National Credit Act also compels banks and other financial institutions to take into account all the credit at your disposal when deciding if you can afford a loan, even if you don’t use the credit facilities. Fewer store accounts could for instance improve your chances of getting finance.
With all this financial info at your disposal you can now draft a financial plan, including a budget. If your expenses and the amount you should save exceed your income start by identifying avoidable expenses, Hattingh says. This includes luxuries such as eating out, movies and holidays. Look at expenses that can be cut back such as cellphone calls, petrol (plan your trips) and rental (move to a smaller place).