South Africa’s weakened Rand is bound to have a negative rippling effect on our economy. The cost of food, electricity, water and imported goods are all set to rise. Now is as best a time as any to take secure control of your finances.
Budget
According to the National Credit Regulator (NCR), as at June 2015 a shocking 11 million out of more than 23 million credit active consumers had impaired credit records or had failed to make debt repayments. Many South Africans lack basic financial awareness and therefore continue to spend beyond their means.
Drafting a budget is the first and most important step towards financial awareness. It allows you to make realistic decisions with an honest approach based on facts rather than assumptions.
A budget will reveal any reckless spending or debt creation. You should look for luxuries that you can live without: cut up unnecessary credit cards, close store accounts, cancel subscriptions, etc.
Prioritise debts
Towards the end of 2015, the South African Reserve Bank (SARB) raised the interest rate by 0.25%. As a result the prime lending rate increased to 9.75% and debt has become more expensive. Economists anticipate a further increase this year.
Paying off debts should be your next priority as budgets are already being stretched thin.
You should compile a list of your debts in order of most expensive (high interest) to least expensive. Then make minimum repayments on the debts with lower interest rates and put extra money towards the debts at the top of the list.
It does not make financial sense to increase your investments while you have substantial debts, as the interest you will be paying on your debts may outweigh the interest you can earn on your investment.
Forward planning
Having clear-cut and long-term goals will help you stay focussed and determined. Saving for a house, retirement or your child’s education gives your saving a purpose. You can then look into specific investment products that are suited for your financial journey.
It also helps to automate your savings and investments to occur when you receive your salary rather than attempting to save what is left at the end of the month. We are headed for some trying economic times making people vulnerable to poor financial decision making.
The future may seem difficult, but with a solid support structure and firm plans for the future we can overcome any obstacle!
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Source: fin24.com