10 Financial Decisions You Should Be Making Today

Businesswoman standing at desk in office

Businesswoman standing at desk in office

  1. Take advantage of compound interest

Compounding makes a big difference to your total investment returns over time, says Wilfred Moyo, Investment and Economic Strategist at Metropolitan. “Start investing early for any goal so that the interest earned on your initial amount also earns interest. The longer your money is left to grow, the more opportunity it has to earn compound interest. “

  1. Buy or rent a home

Marwan Abrahams, Executive General Manager at Old Mutual Personal Finance recommends getting professional guidance when making this important decision, but it all depends on your personal circumstances. “Buying is usually a good idea, as your residential property constitutes an important investment, but the timing, type of property and intended term of ownership may all influence the decision.”

  1. Get insured

“We’re all exposed to risks that we don’t have control over such as death, disability and fires,” Moyo points out. “Insurance cover against such events is important. A qualified financial adviser can provide you with a risk assessment that fits your unique circumstances.”

“People tend to think that that illness, disability or death won’t happen to them, but our claims statistics show just how many things can and do go wrong,” says Abrahams. “Ironically, the advances in science that improve our chances of surviving cancer, strokes or a heart attack often come at a huge financial cost because of lifestyle adjustment and the unexpected costs of recovering from an illness.”

  1. Set aside an emergency fund
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It is important to set up an emergency fund of three to six months’ worth of your monthly salary, says Moyo. “Keep it in cash or have a money market account – preferably in a savings vehicle in which access is restricted, but you’re still able to get hold of it in case of an emergency. Set up a debit order payment so that it becomes a monthly non-negotiable.”

  1. Plan now for your retirement

“There are still far too many South Africans finding themselves out of pocket long before they die,” says Abrahams. “This is because they start saving too late, aren’t saving enough or are using the wrong vehicles. Start saving today – if you find it difficult to spare an extra cent, think of where you can cut costs. A DStv subscription, for examle, costs over R600 a month. If that money is saved with a potential return of 8% for the next 20 years, you could save R550 000.”

  1. Invest in yourself 

The world keeps on changing – and so should you. A course or qualification that will lead to a greater future income should be seen as an investment in yourself, says Moyo. “Your qualifications may help you open doors that you wouldn’t have otherwise. Chat to your employer – they may consider covering part or all of the fees if it will assist your career development.”

  1. Pay off your debt

“Some people fail to consider the impact of their “living for today” lifestyle on their future financial well-being,” says Abrahams. “They live from payday to payday and have no money to save. Start by paying off your most expensive debt, then move onto the next most costly and focus on settling it by paying more than the minimum instalment. Once you’re debt-free, work on a cash basis. Make your money work for you, rather than grafting hard for your creditors.”

  1. Make the most of personal tax deductions

While it is every citizen’s duty to pay their taxes, there’s no benefit in paying a cent more than legally required. “Plan carefully to ensure taxes and duties are kept as low as possible,” says Abrahams. “Make sure your salary, retirement investments, properties and other investments are structured in such a way that any relevant taxes and duties, such as income tax, capital gains tax, transfer duty and estate duty are minimised.”

  1. Set up (and stick to) a personal budget

 “Without a personal budget and the discipline to stick to it, you’re bound to fall short of your financial goals,” says Moyo. “It doesn’t need to be complicated, but make sure you accommodate your emergency fund. Then stick to it, allowing a little wiggle room for things that may pop up as the month progresses.”

“Knowing where your money is going each month is a critical step on the road to financial freedom,” agrees Abrahams. “Ultimately, you need to reach a stage where you are in full control of your finances. A budget gives you an instant indication of what you are spending your money on, helping you to identify where you can cut costs.”

  1. Buy assets, not liabilities

“One of the critical characteristics of those who enjoy financial freedom is that they invest in assets that provide income,” says Moyo. “Those who don’t have amassed debt, or have bought items that are not income-generating. For example, a car depreciates in value, so think twice before buying a brand new luxury model. On the other hand, property usually increases in value.”

source: destinyconnect.com

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