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January is the time for reform and new beginnings, but there are eleven more months that follow, where self-dicipline falters and all those firm resolutions fall by the wayside.
According to Marilize Putter, Dean of Financial Planning & Insurance at Milpark Education, most people do not have the staying power to see their financial resolutions through.
"Most South Africans discard their new year’s financial resolutions, budgets and saving plans as soon as the realities of festive overspending reappear as debt," says Putter.
To prevent that, Putter suggests following a 12-month plan, which outline specific month-by-month tasks that are easy to accomplish and give you more control over your money.
January: Touch base and determine your spending plan
It is important to first establish the base from which you are working. What is your current assets and liabilities? Do you own any assets from which you can generate income?
What is your monthly income and how do you spend that income? Distinguish between fixed expenses (such as rent, bond repayments and medical aid contributions) and variable expenses (such as food and entertainment).
Identify areas where you over-spend and expenses that you can cut out.
Draft a spending plan for the rest of the year and share this with your partner or family. Identify an amount that you will put away every month to start saving for the December holidays and all the back-to-school expenses thereafter.
Keep track of your spending at the end of every month.
February: Slim down on debt
Many of us are over-indebted due to status-driven spending patterns. Considering the current interest rate and the long-term forecast of further increases, it may be more beneficial to first pay off debt before saving.
Identify debt with high interest rates, such as short-term personal loans and credit cards. Contact your bank to find out if you cannot consolidate your debt in order to pay a lower interest rate.
Additional payments towards the debt with the highest interest rate will also help you to save money as you will spend less on repaying the interest portion of the debt.
March: Make an appointment with a certified financial planner (CFP®)
Financial planners need to meet stringent qualification and competency requirements in order to obtain the internationally recognised CFP® designation.
A CFP® professional will be able to draft a comprehensive financial plan for you and will be able to assist you with clarifying your financial priorities.
April: Review your spending plan
By this time of the year, we have experienced unexpected school expenses for the children, as well as some of the usual events such as public and school holidays, birthdays, etc.
