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7 Steps to Gaining Financial Freedom

Published on: 24 July 2018

With the increasing cost of living and a culture characterised by poor saving habits, exercising smart financial habits from an early age has become more and more important. For young people, stepping into the world of ‘adulting’ can be a big shock, with low salaries and growing responsibilities. The need for early financial planning is a necessity; and the good news is, it doesn’t have to be a drag!

For youngsters starting off in the working world or simply looking to make smart saving decisions, here are 7 key tips to get you started:

  1. Start early. Don’t wait until debt becomes a problem to have the necessary financial chats. In fact, get into the habit of saving as young as possible. Learning to plan ahead – whether it is to save for that new PlayStation game or put aside funds for travel – will help to instill basic skills, and instill the importance of working towards specific financial goals.
  2. Get budgeting. Working within a budget is possibly one of the most important financial skills for any young person to master and is something that many adults struggle with all their lives. So rather than shelling out money for new goodies or clothes, make working within a set monthly budget a habit. This will strengthen the understanding and appreciation of the value of money.
  3. Power up your savings. South African debt rates are some of the highest in the world, mostly due to the severe lack of savings culture. With many establishments offering up lay-byes and easy credit, it can be very tempting to spend money that is not actually in the bank, meaning any surplus income essentially goes towards interest. So power up on savings by opening a savings account, assign a portion of your budget to it - and stick to it!
  4. Avail of a financial advisor. Managing your money can be an overwhelming task, particularly when faced with expenses and responsibilities you have never had before. Don’t be afraid to ask for help. Seek the assistance of a financial advisor – preferably one not tied to any commissions – and start putting aside small amounts that can then accrue interest. Even if it is a few hundred rand each month, you will be amazed how fast that money can grow.
  5. Keep your credit in check. Your credit score assesses your ability to repay loaned money based on your previous bill payments and financial history. Come the day you are looking to buy a car or secure a home loan, your credit score will be of the utmost importance. So while it might seem like dodging your rent for a few weeks in favour of a fun Friday night out could be a great idea, it may impact your future quite significantly. Pay your bills on time and make sure to use online credit score checkers to make sure you are staying in good stead.
  6. Go it alone. While it might be tempting to ask your parents for a hand out from time to time, you will be able to strengthen your own financial profile by ensuring valuable items like cars are, in fact, insured in your name. Yes, you might be liable for a higher premium given your age, but consider it a worthy investment in your own credit rating and financial future. Alternatively, be the specified or named driver on their policy to at least build your own car insurance history.
  7. Steer clear of debt. When you are finally making money of your own, it can be very tempting to splash out on all manner of luxuries. Remember, taking out a loan or overspending on a credit card can have an enormous financial impact on you for many years. So try where possible to work within your budget and keep saving – you will reap the benefits a few years down the line.

Financial planning is not something many of us think about until confronted with the reality of bills, debt and mortgages. Getting into the habit of making smart saving decisions is a no-brainer – it’s never too early (or too late).