The tough get going

In these tough times, managing your finances effectively is crucial. With rising interest rates and inflation, it has become increasingly difficult to maintain financial stability. It’s important to change your mindset and take control of your expenses. Adopting a proactive approach and planning a budget can help you stay on top of your finances. The following 5 tips should help you navigate stormy waters.

We are facing a lot of financial headwinds, not only in South Africa but the world. Times are tough. Interest rates and inflation have rapidly increased, and a lot of us have been put under a great deal of financial stress. Having a victim mentality won’t get us anywhere. Be proactive and take control of your expenses. Plan, budget, and execute.
Reel it in
Now, more than ever, we need to be on top of our expenses. We need to know exactly what we are spending and where the leakages in our budgets are. As interest rates have increased over the past year, we have been squeezed little by little, and some of us haven’t adapted our budgets accordingly. Have a look at your past three months’ bank statements to see exactly where you’ve spent outside of your budget and where you can cut back. Create a new budget and make sure to stick to it.
Better sooner than later
Pay more than what’s expected of you. Now that we’ve seen what interest rates can do to our disposable income, it shows us the importance of staying out of debt. Here is a little example: The maximum interest rate of a personal loan is 28.75% per annum (compounded monthly). A loan of R50 000 at an interest rate of 28.75% over 72 months would have a repayment amount of R1 464.15 p/m and a total cost of R105 418.72. The total interest paid would be a mammoth R55 418.75. If you decide to pay R2 000 p/m, you will decrease the length of the loan to 29 months and decrease the interest by R13 048.
Peter to pay Paul
We have a way of sabotaging ourselves when we do this. We believe that payment will come through, and when it doesn’t, we shoot ourselves in the foot. Only spend what has already come into your pockets and don’t bank on money that hasn’t come in yet. By doing this we trap our future selves. Don’t fall for special offers. Stores always have special offers and it won’t be a once-in-a-lifetime deal. It will come around again. Remember, impulsive behaviour is the enemy of your financial success.Emperors new clothes
Don’t fall for the emotional tug of peer pressure. Live according to your plan and not according to other people’s pressure on you. Spending money or “showing wealth” doesn’t generate wealth in any shape or form, it’s an expense and won’t benefit you on your journey to becoming financially independent.
Good luck out there!