Financial fitness starts today

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Rising costs are making it harder and harder for millions of South Africans to make ends meet each month. But if you want to realise your dreams and retire well, you need to start saving for tomorrow, today.

John Manyike, Head of Financial Education at Old Mutual, says the government is under increasing pressure to balance its own budget. The country currently has debt of R2.2 trillion, the equivalent of 49% of GDP. This makes significant increases in social grants or pensions for struggling South Africans unlikely.

“It is therefore important not to rely solely on the government pension for your retirement – but to start saving as early as possible to ensure that you can maintain a reasonable standard of living when you do stop working, Old Mutual Savings and investment monitor also reveals that one in three South Africans believe that the government will look after them when they retire.”

Consumers need to get creative about stretching their income.

“Cutting down on indulgences such as eating out in restaurants or buying clothes on a store-card that has a high interest rate, or even packing your own lunchbox instead of buying takeaways, will go a long way towards enabling you to save a little extra each month.”

He points out that even a small increase in the amount that you put away each month can make a huge difference over time, thanks to the power of compound interest.

Manyike believes the key to achieving financial fitness is to live within your income and not your credit limit.

Old Mutual Financial Education’s five tips on how to create financial well-being

Face reality. Face the facts

Open all your bills, review your bank statements and request a credit report from one of the credit bureaus. You are entitled to a free credit report once a year, in your birth month. This will give you an idea of what your credit profile looks like and alert you to any negative listings your creditors may have registered.

Set your goals and stay committed

Set realistic goals, prioritise in order of importance, estimate how much you need to save for each, and settle on a short, medium and long term timeframe.

Be emotionally connected to your goals as this will keep you disciplined during difficult times such as the festive season and holidays, when you may be tempted to overspend.

Determine your needs – honestly

Cut back on lifestyle expenses you can do without, and then use those savings to pay off debt. If you eat out in restaurants once a week, decide as a family to reduce that to once a month.

Before you spend money on ‘nice-to-have’ items such as home décor, expensive shoes, or a new car, ask yourself if it is a ‘need’ or a ‘want’. Don’t spend on items that are not absolutely necessary when your goal is to destroy debt.

Stay focused on tackling your bad debts

Pay off your most expensive debt first. Your credit cards or store cards generally carry higher interest rates than your bond, for example.

Consider consolidating all your debt into one loan to replace multiple interest charges, service fees and debit order fees with one consolidated payment.

Budget. Budget. Budget

There is a lot of wisdom in the old adage, ‘if you can’t measure it, you can’t manage it’. Your budget will help you to live within your means so it is vital that you record all spending. If you want to reach personal financial freedom, a budget is invaluable. Keep your eyes focused on your goals and be disciplined about staying on course. If need be, change your friends to better your chances of sticking to your budget.

Manyike concludes, “Whether you are determined to start planning for retirement or saving for a new home or children’s education, consult an accredited financial adviser. Today’s the day to seek great advice and then put it into action.”

For more information on Old Mutual’s popular financial education programme, join the digital community on Facebook (On the money financial education) or follow them on Twitter: @OM_ONTHEMONEY.

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