T start of a year is the perfect time to implement some meaningful resolutions to seize control of your finances.
Instead of berating yourself for splurging over the holidays, use the pinch on your pockets as a motivation to rid yourself of debt and become more financially secure over the next 12 months.
Here are some ideas for becoming more financially savvy in 2017:
January: Begin with a budget
A detailed budget is one of the most important tools for achieving your financial goals. Without an understanding of what you are actually spending versus what you can afford, you will likely keep falling into debt.
Begin by recording your monthly expenses, using a notebook or budgeting app. With a realistic understanding of your finances and spending, plan your monthly budget according to your needs (such as rent, electricity, transport, savings and risk cover) and wants (movies and restaurants).
As part of your budgeting exercise, look for ways to cut back on unnecessary expenses. Instead of paying for a subscription, for example, you could be repaying an expensive debt. And if you are lucky enough to be debt free, rather invest this money.
February: Prioritise repaying shortterm debts
Make repaying your short-term debts such as credit cards and store accounts your top priority in order to ease the strain on your budget.
Short-term debt with high interest rates can quickly snowball, placing huge pressure on your finances. Gradually crossing these debts off will provide a welcome mental boost.
March: Consult a financial adviser
With a budget in hand, think about the financial goals that you would like to achieve. Divide these into short-term goals such as an upcoming holiday or a short educational course, medium-term goals such as a new car or your child’s education, and long-term goals such as a secure retirement income.
Then consult a trusted financial adviser to develop a financial strategy that will help you to reach your goals.
It is also very important that your financial strategy includes protection against risks that could leave your family financially destitute, such as death, disability and severe illnesses.
Your financial strategy needs to be reviewed annually as your personal circumstances change.
April: Protect yourself against the unexpected
Start implementing the advice received from your financial adviser, starting with life and disability cover.
If you are a breadwinner with dependants, you owe it to them to have sufficient life and disability cover.
If you are a young income earner with no dependants, you owe it to yourself to have at least disability cover in place.
A young person who becomes disabled and can no longer earn an income would have to rely on the one lump sum disability benefit payment for a lifelong income. While insurance is often a grudge purchase, it is vital to protect your future income against unexpected events.
Medical aid cover is also extremely important, as the high costs of healthcare pose a significant risk to your financial wellbeing, especially treatment which would require hospitalisation.
You will need to ensure that you have sufficient short-term insurance to protect your valuables against any unfortunate surprises such as fires, weather damage, accidents or theft. This would include your home, your car and personal belongings such as jewellery and electronics.
May: Get a will
Dying without a will could place a huge financial burden on your family, as the laws of intestate succession mean that your loved ones may not be provided for in the way you would hope.
Begin the process by gathering together the details of your debts, insurance, investments and any other assets.
Then consult an attorney, bank or financial services provider to assist you, as there are a number of legal complexities in drawing up a will that you may not be aware of.
June: Chip away at your long-term debts
Once you are rid of short-term debt, increase your repayments on long-term debt such as your mortgage or student loan. Adding just R200 a month could take months and thousands of rands off your total repayments.
July: Invest towards your financial goals
July is National Savings Month, so get into the spirit by looking for additional ways to save, and invest your money towards reaching your financial goals.
If you struggle to save at first, aim to gradually increase your savings over time. You could, for example, save 5% of your salary this month, 6% the next and so on.
August: Reflect on your progress
Stay motivated to stick to your financial goals by taking the time to look back on your achievements thus far.
Spend some time teaching your children important financial lessons to prepare them for the future, focusing on budgeting, distinguishing between wants and needs, and the importance of saving.
September: Pay the taxman
Get a head start on completing your annual income tax return, as the deadline for submitting paper copies soon becomes due.
This is a good time to teach yourself about the various taxes that may apply to you and your life stages on the South African Revenue Service (SARS) website, which offers very useful advice and explanations.
October: Review your medical aid cover
The window for you to change your medical aid benefit option opens in November or December, so prepare and check that you are still satisfied with your medical aid by researching and comparing different options.
You could also consider changing schemes if you are unhappy with the level of service provided by your current scheme. However, it is important to research the various waiting-periods and exclusions that may apply.
November: Make the most of sudden windfalls
If you are lucky enough to receive an annual bonus, plan carefully to make the most of your windfall. Channel funds into repaying outstanding debt, or consider creating a rainy day fund to help you cope with unexpected expenses such as vehicle repairs or a new geyser.
Continue adding to your emergency fund until it equals at least three times your monthly salary. Deposit this money into a separate bank account or money market fund in order to avoid the temptation to spend it.
With the upcoming holidays, you could also allocate some funds towards rewarding yourself and your family, or consider helping someone less fortunate.
Remember that New Year expenses such as textbooks and uniforms lie ahead.
December: Have a stress-free holiday
After a year of dedicated hard work, you should have covered all your financial basics including:
• A budget
• Life and disability cover
• Medical aid
• Short-term insurance
• A savings and investment strategy
• A will
• An emergency fund.
If you have not achieved all these goals, pencil them in for first thing in the New Year. You should also make sure that your family knows where to find important relevant financial information and who to contact in event of an emergency.
Finally, enjoy a carefree holiday, and congratulate yourself on entering the New Year on a secure financial footing.
Niel Fourie is public policy actuary at the Actuarial Society of SA