It’s a situation too many South Africans are all too familiar with; coming back from a well-deserved year-end break only to realise that you’ve overspent significantly and that your personal finances are in far poorer shape than they should be at the beginning of a new year.
Rather than crying over spilt milk, use the situation as an opportunity to re-evaluate your priorities and put (sustainable!) measures in place that will help ensure you’re in a better financial position a year from now.
Here are some of the actions you can take that will have a lasting impact on your money matters.
Bring on the budget
You’ve heard it before and here it is again: get in the habit of tracking your income and expenses. A budget is one of the most effective ways to manage your money as it offers you a complete overview of what’s coming in and going out.
The old axiom “What gets measured, gets managed” is particularly true of personal finances. At first, drawing up a budget is very daunting – and possibly a stark reality check – but ultimately the purpose of a budget is to help you be savvier about your cash.
Consider using a free Google Sheets budget template that can be customised in countless ways to match your exact needs, or search for a similar resource online. The great thing about a Google Sheets budget is that it can be updated across devices and easily shared with another Google user, which is useful in situations like families, where the household budget, for example, needs to be viewed by more than one person.
Save where you can, starting with grudge purchases
Assess all your monthly expenses to determine where you can save money.
One of the essential purchases you can save on is car insurance, particularly if you drive less due to the Covid-19 Alert Level restrictions and remote work. Car insurance is a ‘grudge purchase’ – or a purchase you need to make though you don’t want to – if you want to enjoy the piece of mind that comes with knowing that, should something bad happen to your car, you’d be covered from heavy financial loss.
An insurer like MiWay Blink makes it possible for customers to save on their monthly premiums, if they drive less than would usually be the case. Through the use of technology, the insurer can measure the amount of driving being done, and pay some of the insurance premium back to the customer if they are not driving often. Head of MiWay Blink, Christiaan Steyn says, ‘You get to pay less if you drive less. This gives the customers more value.`
Become property savvy
Consider starting the new year by setting aside a bit extra each month to pay into your bond. This will not only save on interest over the long term, but it could also shave a few years off your loan repayment period. This is the advice of Carl Coetzee, CEO of BetterBond, who shares the following by way of example: “By paying just R1 000 extra each month on a 20-year bond for a R1 million home, at the current prime lending rate of 7.25%, it’s possible to save about R219 000 in interest and reduce the loan repayment period by four years.”
Coetzee adds that, if you are thinking about making 2022 the year you buy a new home, make sure you have all your documentation ready – salary slip, bank statements, household expenses – so that your bond originator can process your application and secure the most competitive interest rate. “Use BetterBond’s affordability calculator to see what you can afford to spend on a new home based on your expenses and income,” advises Coetzee. You can also get pre-approval through BetterBond, which will include a credit check so that you start the new year knowing your credit score.
Pay only for what you use by renting appliances, furniture and more
No matter how effectively you manage your budget, unforeseen expenses always come up – the fridge breaks, your teen’s laptop that he needs for school gives up the ghost and the dining room table is on its last legs, literally. Replacing appliances, electronics and furniture typically requires a large upfront cost with the only way of managing it being through high-interest credit. But there’s another option, one that’s gaining traction both locally and internationally. Rent to own is a transactional model that allows consumers to access goods on a flexible monthly basis. Rather than purchasing a television outright, the unit is rented on a month-to-month basis with all the maintenance and insurance costs built into the monthly premium.
Providers like Teljoy have been offering this service to South Africans for some 50 years and Teljoy continues to expand its offering. “Our rent to own model prioritises access over ownership, allowing for unlimited use of the unit for no more than the cost of the monthly premium. It’s increasingly the way consumers across the globe are choosing to use electronics, appliances, furniture and even fashion and leisure equipment,” explains Jonathan Hurvitz, CEO of Teljoy.
Ensure your savings go further
Last but not least, make saving a bit of money each month a key priority. Consider opening a tax-free savings account and making regular deposits into that account. The benefit of this particular product is that there is no tax payable (up to a certain threshold) on the interest earned or the dividends received on the money in your tax-free savings account.
10X Investments offer a tax-free savings account with competitive returns from highly diversified index tracking funds. The sign-up process is super simple with the 10X platform designed to make saving and investing simpler and more accessible so that more South Africans can make the most of their money.