While everyone is getting back to jogging, cycling and fitness, it’s also important to stay financially secure this summer, as economists don’t expect rising interest rates and price hikes to go away anytime soon.
Neven Narayanasamy, Head of Product at DirectAxis, said now is a good time to consider your financial position given the financial impact of rising inflation and interest rates, as well as slowing economic growth and load shedding.
“Just as getting back in shape after winter has long-term health benefits, good financial exercise will prepare you for the holidays and the year ahead, and it will pay off over time.”
Inflation eats away at the purchasing power of your income, and its impact on your finances becomes apparent when you consider its impact over time, Narayaanasamy said. Cumulative inflation since 2016 means you’re buying 34% less money now than you did then, and most people’s incomes haven’t grown that much.
“Consecutive rate hikes mean people pay more for bonds, auto finance and other loans, which also affects their remaining monthly spending. Continue to live the same lifestyle, with less money, and financially It’s the equivalent of eating poorly, drinking and smoking, ignoring the health risks.”
Also read: How to start your savings
Narayaanasamy shares these five tips to improve your finances:
- Set some goals, but be realistic, and set deadlines to achieve them. It’s unrealistic to think you can run a marathon if you’ve never run more than 5 kilometers. Over time, you must build fitness until you are ready to run 42 kilometers. When setting financial goals, start with a series of achievable goals rather than trying to take on a big challenge and get discouraged. Once you’ve won some small wins, perhaps addressing and closing an unnecessary account, you can set bigger goals like saving or investing money each month.
“Some financial experts recommend the 50/30/20 rule as a guide on how to prioritize spending. It recommends spending 50% of income on necessities such as food, rent or paying a security deposit, and 30% on discretionary Expenses, such as clothing and entertainment, and then save or invest the remaining 20%. While this is impossible for everyone, especially now, use it as a guide, a direction to work towards,” Narayaanasamy said .
- Gain financial literacy by gaining the skills and knowledge to make informed financial decisions. A wealth of free, easy-to-understand information is available online, including here www.directaxis.co.za/make-a-plan/all.
You have to start by learning more about the things that affect your day-to-day financial affairs, such as understanding insurance, getting the most out of medical assistance, lowering the cost of your cell phone, or saving on your electricity bill, Narayaanasamy said. As you learn more, you can expand your knowledge and understand what investing or compounding is and how it can work against you or against you.
Also read: This is how South Africans handle their financial woes
- Spend less than you earn. This means to set a budget, you can find a budgeting tool here https://www.directaxis.co.za/make-a-plan/set-financial-goals-and-manage-your-finances-like-a -Dear. Alternatively, just draw a line in the middle of a piece of paper and list all your income on the left and all your monthly expenses on the right. Your bank statements, bills, and receipts from the past few months can all help you see exactly what you’re spending and spending. You can then see if you can cut any expenses to save some money. Revisit and update your budget every month.
- Try to save or invest in something every month, even if it’s not the 20% suggested by the 50/30/20 rule. By budgeting and tracking your expenses and avoiding unnecessary expenses, you can save some money each month. Ideally, try isolating it with something like a tax-free savings account, which will help you avoid the temptation to spend.
“You can also automatically put your savings to work by placing a fixed amount in a savings or investment account with a stop loss order. Something you’ve never seen before – you won’t miss out and you’ll be amazed how quickly you can save fast.”
- Track your progress. A good way to keep track is to check your credit score regularly. There are many free tools that allow you to do this, including www.directaxis.co.za/your-pulse. In addition to your credit health rating, it also gives you a list of your monthly expenses and suggests ways to improve your score.
“Getting off the couch and walking, running, cycling or working out for the first time can be daunting. So you can take the first steps to take control of your finances, but once you start, over time it can become It’s easier and incredibly rewarding when you hit your goals,” Narayanasamy said.