Most of us set our goals too high when we make New Year’s resolutions and so give up because they seem unachievable.
Caught up in the excitement of a New Year’s Eve party, possibly fuelled by a few glasses of champagne or a need to impress, we commit to running the Comrades, climbing Kilimanjaro or learning the saxophone.
Then, the first agonising run round the block, gasping holiday ascent of Table Mountain or cheek-aching, strangled warble brings us crashing back to reality. Mostly we don’t keep trying.
The same is probably true of our financial resolutions. Lofty plans to get out of debt, start saving and maybe make some investments soon get shelved after a long, belt-tightening January. Soon we find ourselves reverting to old habits, buying things we don’t need and missing repayments when money gets tight.
DirectAxis Financial Services asked its experts to come up with some simple suggestions that could help struggling South Africans take better control of their finances.
“We picked easy-to-do things that should help you feel more in control and will also improve your financial profile. It’s not a definitive list and not all the ideas will work for everyone, but even choosing one or two should help,” says Marlies Kappers, chief marketing officer.
Take a hard look in the (credit) mirror
Your credit score is the way the financial world sees you, but most South Africans have no idea what their credit score is, much less what to do about it.
You are entitled to one free credit report a year from one of the credit bureau. This will tell you your score but doesn’t provide any context or what to do about a bad score.
Free online tools such as DirectAxis Pulse www.directaxis.co.za/pulse will give you an easy-to-understand credit rating – poor, getting there, good, very good, excellent or perfect. It shows you what is affecting your credit score – positively or negatively – and, importantly, what to do about it.
A better credit score will mean the financial world will see you as being more financially responsible and less of a risk. This means they’ll be more inclined to do business with you and may even offer you better terms, such as lower interest rates.
Paying your debts on time will earn you a good financial reputation which will be reflected in your credit score.
Regularly checking your credit profile will give you a good idea of what your financial commitments are each month. You can then assess these and decide which debts are best to reduce first. Usually these are short-term debts with the highest interest rates. By paying these off first you may also save yourself some money over the long term.
Set a budget
It’s not as hard as it sounds. As with many things that seem daunting, getting started is often the hardest part.
It might be as simple as setting a grocery budget. Make a list of what you need each week or month, estimate the cost and set that as your budget. Not only will this give you a realistic idea of just how much you spend on shopping but should also reduce the temptation to put unnecessary items in the trolley.
Once you’ve mastered your shopping budget you can try to draw up a household budget. The easiest way to do this is to draw a line down the centre of a piece of paper. On the left list all your income, such as salary, money you may earn from freelance work or property rentals. On the right list all your expenses such as bond repayments, rates, living expenses, transport, cell phone costs. Try to be as detailed and honest as possible.
You may not get everything right the first month, but over time it should give you a better picture of where you’re spending money and importantly where you might be able to cut back and save.
Improve your financial knowledge
If you don’t feel you have a good grasp of financial affairs, don’t feel alone. Most of us don’t. At first glance the financial world can seem complicated and filled with jargon, but if you’re prepared to look for it, there’s plenty of understandable information and explanations available. You can search for topics, tips and even videos at https://www.directaxis.co.za/make-a-plan/all
There are plenty of other websites, news outlets, radio shows, expert blogs and columns available. In fact, the sheer volume of information might make it a bit frightening. Perhaps choose a few subjects you may like to find out more about and start there. Compare what you find with friends and colleagues. Over time you’ll find sources that give you the best information that suits your needs.
“Deciding to take better control of your finances isn’t something that should be an unachievable resolution. Start with something small and manageable such as your credit profile and go from there,” says Marlies.