Halloween may be over, but there are still a lot of ghoulish money mistakes you can make that could keep you in the red for longer
than you planned to be.
But it doesn’t have to be this way – by making a few simple adjustments to your lifestyle and giving up some bad habits, you could banish the debt gremlins forever and get back on track with your financial goals.
Here are some common financial blunders and advice on how to avoid going down this scary path.
1. Keeping up with the Kardashians, Khumalos and Karims is still something many try to achieve.
Priya Naicker, advice manager at Old Mutual Personal Finance, says: “Living beyond our means can result in unnecessary debt that is very hard to get rid of.
"The situation is so dire that working metropolitan South Africans are allocating on average 16% of their monthly income to paying back debt.”
If you are making purchases just because your friends or family members have, you need to re-evaluate your spending habits, particularly if you are in debt.
The solution: Don’t use debt to keep up with your peers, so always avoid making last-minute purchases with your credit or store card.
Store card debt in particular is one of the most expensive forms of debt.
This doesn’t mean that you can never spoil yourself – but rather fund your spoils with your savings or discretionary money, recommends Naicker.
NOT PROTECTING YOUR INCOME
2. If last week’s mini budget is anything to go by, South Africans are in for a tough time.
Government is in debt and is struggling to find its way out.'
Ratings agencies are waiting in the wings to downgrade us at a moment’s notice. Growth is slow and that means the jobs market will continue to stagnate.
The solution: If you lie in bed at night worrying about losing your job, it’s best to safeguard your income, particularly if you have dependants.
Speak to a financial adviser about taking out income protection with retrenchment cover.
3. It’s hard to access your retirement savings, but there’s a good reason for that – it’s to safeguard and protect your assets.
However, when you switch jobs, it’s possible to cash in your pension.
But if you access your pension early and spend it on other things, even if it is a home extension or tertiary education, you have to play catch-up and start from scratch again.
Dipping in can financially set you back years.
The solution: Start saving from the day you start work and don’t cash in your pension when you move jobs.
Rather transfer that money into a preservation fund or put it into your new pension scheme.
If you’re disciplined about it, you won’t have to suffer nightmares over your retirement shortfalls.
KEEP IN BUDGET
4. Budgets may be boring and cumbersome, but they also force you to take note of your debt obligations and other monthly commitments.
If you ignore your budget, your spending habits will come back to haunt you.
The solution: Choose a day every month to go over your budget. If you know that you need to make adjustments to it, make the changes immediately.
Work on it as you go along, but stick to the key principles and goals that you set out for yourself.
Naicker explains that many of us tend to adopt a “winging it” approach to our finances – we just hope our money will stretch to the end of the month.
“In the past year, 52% of South African metro working households found (at least once) that their income did not cover their living costs.
"Drawing up a budget is important, sticking to it is key and peace of mind, together with achieving more of your goals through conscious saving, is the reward!”
PLAN FOR THE FUTURE
5. When it comes to making long-term plans, many of us aren’t very good at it.
If you’re expecting a baby, don’t just fixate on the present financial outlay such as hospital bills – remember to also plan for the distant future, such as your child’s tertiary education.
The solution: The days and years can whizz by and, before you know it, the child who was born just “yesterday” is asking about money to study at university.
Don’t only think about the next few months or years – think about the long-term goals too.
Talk to an accredited financial adviser who can go over all those possibilities and financial responsibilities with you today, and save adequately
TAKING BAD ADVICE
6. There are a few people in your life who want the best of everything for you, however, there are also people with bad intentions – and they don’t only come out at Halloween and wear big, scary masks.
The solution: People with bad intentions can take on any form and the key is not to trust just anyone with your money.
Ignore people who promise you fantastic returns, or who send you emails asking for help in exchange for large deposits of money for “safekeeping”.
If someone offers you an expensive holiday in exchange for your signature – don’t sign it.
Take it home and read it over or get an expert to look at it.
Naicker explains that great advice is invaluable.
“Only 13% of metro working South Africans have a relationship with a financial planner.
"Many think we can do it alone, or we don’t even consider it at all. A financial adviser who you can trust will help you to maximise your money so you can live your best life.”