Saving for expensive days… and decades

We’ve all received those SMSs saying that a long lost relative has left us millions of Rands. How amazing would that be? Of course we know these are just scams and that money doesn’t come that easy! The good news is that you can still prepare for expensive days now, and in the future, with these 10 practical financial planning tips:

1. Build a budget — if you don’t know how much money you’re spending every month, and are spending a lot more than you earn, then the time to budget is now. There are many helpful budgeting apps available, so you can easily find one that works for you. Many banking apps also track your spending, which gives a clear indication of where you stand after all your expected debit orders and scheduled payments.

2. Start an emergency fund — ideally an emergency fund should be large enough to cover three times your monthly expenses. You’ll only know your expenses once you have an accurate budget. An emergency fund is essential as it prepares you for large unexpected expenses. Without this fund, you could face a huge amount of debt that may take you years, if not decades, to repay.

3. Become a smart spender — if you often find yourself running out of cash at mid-month, then it’s time to relook your spending habits. Take a look here to find out how to kick the overspending habit.

4. Know good credit from bad — not all credit is bad and most of us need credit to make big purchases for the things we need, like a car. In this example, credit becomes bad when you can’t afford the monthly repayments on that car. To avoid this and keep ‘good’ credit, buy a car that can comfortably fit into your monthly budget. Other examples of good credit are things like a student or home loan and bad credit include things like clothing store cards.

5. Get your insurance sorted… for expensive days — as soon as you own something of value you stand to lose a lot if it’s lost, damaged or stolen. If that were to happen, would you have the money to immediately replace it? Everything from your car to the items inside your home and the things you carry with you like your cell phone, should be insured. If you have a family, life insurance is also a must, as this will ensure they’re taken care of financially if you pass away.

6. Make a will — everything you own, your assets and personal possessions, are known as your estate. A legally valid will is the only way to ensure that your estate is divided up the way you want it to be, when you pass away. And it’s not just about material possessions, your will also outlines wishes about critical issues like guardianship over your children, the running of a family business, etc.

7. Invest in a family home — unlike cars, property usually increases in value over time, and is also something that can be passed down from one generation to the next. Of course you need to do your homework first and find a home for which you can afford the bond repayments and maintenance. And make sure that you get both buildings insurance (for the structure of your home) and home contents insurance (for the things inside) to protect this precious investment.

8. Plan ahead — all of the above tips speak to planning ahead. Generational wealth is built on solid foundations and is maintained by each generation making smart financial decisions, continually. Make sure that everyone in your family is aware of where and how your money is invested.

9. Spread the word — share the knowledge you have gained and lead by example. Children learn a lot about spending and saving from their parents, so set a good example that you will be proud for them to follow. Include them in your budgeting discussions. This will give them a good idea of how the family’s money is spent each month, where the money comes from (salaries, investments, trusts etc.) and what is left over for ‘luxuries’. It will also make discussions around trade-offs much easier, for example, ‘if you want new sneakers this month, you can’t get something else at every shopping trip.’

10. Consult the experts — whether you need help managing your budget or debt, are not sure where to invest extra money or how to go about making a will, consult an expert. A reputable financial advisor will give you the guidance and advice you need to make informed decisions about your financial future.

We hope that these tips have encouraged you to start (or continue) your saving journey. And remember that even small changes can make a big difference.