How To Stop Living Paycheque To Paycheque

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How To Stop Living Paycheque To Paycheque

Statistics show that most South Africans are cash-strapped at the end of the month. Here’s how to better manage your money

About 69% of South Africans aged 16 and older would not be able to meet their expenses for three months in the case of an emergency, according to the 2015 Financial Literacy in South Africa study by the Human Sciences Research Council (HSRC). Furthermore, many fund their lifestyles with debt.

Samke Mhlongo, founder and CEO of TNC Wealth Partners, says this is a common problem because of a combination of three factors: a poor savings culture, a poor understanding of inflation and a poor understanding of the mechanics of compound interest.

“The mistake many people make is that they try to maintain the lifestyle they’re used to instead of making the necessary sacrifices to live within their means and settle their debt as soon as possible,” she says.

Running out of money

People find themselves strapped for cash mainly because they do not respond to changes in the economy or their circumstances, says Mhlongo. If circumstances change, it’s crucial to adjust your spending habits accordingly.

READ MORE: Changes that will help you stick to your budget

Many are also under the impression that they can manage their finances themselves, and seek professional help only once they’re at risk of defaulting on their debt repayments. Mhlongo says that some people try to make up for a poor financial decision by taking on more debt, which usually comes at a higher interest rate, and further affects their financial standing.

How to gain control

Gather information: Pull up your ITC credit report, three months’ bank statements, and personal balance sheet and income statement.

Understand your financial situation: Use your ITC report and bank statements to complete your personal balance sheet and income statement. Your balance sheet details all your assets and outstanding liabilities, and should include your inflows and outflows. This is a good way to identify where your money is going so you can take active steps to manage it.

READ MORE: Find financial freedom with these eight tips

Reduce expenses: Pinpoint what you’re spending your money on and where you can cut back. Spend less on luxuries such as entertainment, clothing, expensive food or big car installments.

Increase your income: Look into ways of increasing your income by asking for a raise, finding freelance or part-time work or monetising your skills.

Prepare a budget: Prepare a balance sheet and income statements forecast, and give it a time frame. This will highlight your financial goals and help you adjust your behaviour in line with them.

Update regularly: Repeat this exercise monthly by reviewing your actual financials to budgeted financials, adjusting your behaviour accordingly and seeking professional assistance where necessary.

Original Article

2017-06-26T05:48:19+00:00