How to kick the Debt

The 2018 Old Mutual Savings and Investment Monitor revealed that South Africans are financially under pressure, with many supporting their extended families and high amounts of debt to repay. If debt is the nightmare that is keeping you awake at night, there are ways to overcome it. Even on a low income it’s possible to control debt or to get out of debt. Managing your debt is all about taking control of your spending behaviour by changing your mindset. That doesn’t mean it’s easy, of course, but it does mean that if you are determined to overpower this nightmare, you can. Commit to making whatever lifestyle changes are necessary. Start living within your means. If you have to use credit, use it responsibly. Draw up a budget and most of all stick to it. And finally, don’t forget to start saving for your future. As an individual you can make a difference to your own personal finances by taking eight essential steps. Following these practical pointers should help to get you on the track to financial freedom. 1. Start off by drawing up a monthly budget. Knowing where your money is going each month is a critical step. Ultimately, you need to reach a stage where you are in full control of your finances. Drawing up a budget is a simple process, and basically gives you an instant indication of what you are spending your money on, helping you to identify where you can cut costs. List your expenses according to your needs, not your wants. This will help you to cut out non-essential spending. You can also get a personalized automated budget from 22seven, a free money management app by Old Mutual. 2. Deal with your debt, and do your best to stay out of debt. Pay off your most expensive debt with any spare money you may have. In other words, reduce the debt that carry higher interest rates and therefore costs you the most, such as store cards or retail accounts. Learn to say “sorry, no” to yourself and your family if it is not within your means to assist. Make sure everyone in your household understands how important it is for you to get out of debt. This might limit the number of loan requests from friends and family. For extra cash, consider selling items you don’t use or want any more. What about notifying your neighbourhood Facebook group, where potential buyers might be close by? Make an arrangement with your creditors. If it doesn’t work, consider consolidating your loans but avoid getting further into debt during this period. If you don’t qualify for a loan consolidation, consult a debt counsellor who is registered with the national credit regulator to assist you with restructuring your debts in terms of the National Credit Act. Take action today to change your behaviour. Procrastination is often your worst enemy and keeps you from taking the small steps that will lead to bigger change. 3. Now consider your long-term goals. Remember that saving money for retirement is your most important long-term savings. It’s a fact that by starting to save early you have a longer period in which to invest, which means that you can take advantage of compound interest. 4. For the medium term, save something each month towards an emergency fund. This will avoid you having to go into debt if unexpected situations strike. Ideally, emergency savings should be kept in a separate account to discourage you from dipping into it. Instead of saving your money in a savings account at the bank, why not explore the option of investing in a tax-free savings account that makes the most of your savings? 5. Protect yourself against loss of income due to death, disability and critical illness. Income protection is a critical part of being financially empowered. You should also consider protection against medical expenses as well as short-term insurance for your assets (car, building and household contents). 6. Now you’re ready to plan for short-term goals. Maybe you plan on travelling in the next few months or perhaps you’d like to buy a new car? Make sure your financial plan take care of your short-term goals, too. 7. Don’ forget to draw up a valid will. Your will is a record of how you want your assets to be distributed among your loved ones and how your liabilities should be paid for. A valid will is an essential element of estate planning and includes everything you own and owe – from property and cars to investments and debts.  8. Importantly, ask the experts to help you. When we kick-start a training programme, for example, we always get help from a gym buddy or trainer. Finances are no different and it is vital that you work with a financial coach or adviser to draw up a financial plan that is a living document, one that inspires you to achieve your goals and changes with you as you change. Your financial plan should be relevant to your individual needs, so that you can live within your means today while still providing for your future.         Choosing The Right Financial Adviser
1. QUALIFICATIONS   For the same reason that you wouldn’t want to see an unqualified doctor if you were ill, you shouldn’t put your financial health in the hands of an unqualified financial adviser. Ask to see the adviser’s training credentials and FAIS accreditation.  

    2. TRUST AND INTEGRITY   Trust is an essential component of any good relationship, and when it comes to your finances, you’ll want to know that you are in good hands. You want an adviser for life who can partner with you to achieve your goals. Get referrals from people you know and trust, or choose a financial adviser who represents a respected financial institution.    
  3. DO YOUR RESEARCH – KNOWLEDGE IS POWER   Depending on the type of adviser, whether practising as affiliated to a corporate or independently, research their practice or the company they represent. Look at their website, service offering and see what customers are saying about them on social media. Also gather as much information about all the various financial solutions as you can – knowledge is power and a good understanding will lead to richer discussions with your adviser.    

  4. ASK THE RIGHT QUESTIONS   Here are some questions to add to your own when meeting your adviser for the first time:   Do you provide holistic and comprehensive financial advice? Which products and services are you licensed to sell? Are you backed by a reputable financial service provider? If so, which one? How can you help me achieve my goals?            
  6. TAILORED APPROACH   Avoid advisers who offer a one-plan-fits-all approach. No two people will have identical financial situations, and a good financial adviser will provide guidance and support that is tailor-made to your unique circumstances. A good financial adviser will help you to take stock of your personal situation and your unique needs, and regularly update your financial plan to shift and change as your life does – so that you stay on track to reach your goals.    

  7. COMMITMENT AND PASSION   Good financial advisers are passionate about empowering their customers to achieve their goals. This should be apparent not only in the first meeting with your adviser but in every interaction you have with them.  

8. THE COMFORT FACTOR   Your financial adviser should be able to relate to you and identify with your personal circumstances and priorities to become your financial partner for life, coaching and guiding you to achieve your financial goals      
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