From the pen of Karin Iten…

Dear Investment Academy Reader,

Who hasn’t complained about money? I certainly have. The difference is, some of us do something about it – we work harder, save more and, ultimately, start to lead a better life. The rest, live like kings, spend their money faster than they can make it and live out their “golden years” in abject poverty.

How do you spot them? Well, they’re the ones with all the latest “must have” stuff, who still continually complain about their “lack of funds”.

The truth is, those “not so well to dos” have a few vital traits in common. And while they aren’t necessarily bad on their own, when put together, they can be disastrous for your pocket. So that’s what we’re looking at this week – we’ll even show you how you can overcome them and place yourself in a much better financial position going forward.

Bad trait #1: You don’t know where all your money goes
Do you suffer from “too much month at the end of the money” syndrome? Aren’t sure where all your money goes each month? If you can’t track your expenses or live without a budget, then you’re in big trouble. After all, if you don’t know what you’re spending your money on and how much, how will you be able to cut back? And did you know this also makes you more likely to skip repayments because you simply haven’t remembered them?

If that sounds like you, stop right there. You have two choices: You either need to hand over the day-to-day running of your finances to your spouse (if he/she is more responsible with money) or you need to draw up a budget and stick to it religiously starting right now. For help on where to start, visit mydebt.co.za and download a budget template right away.
 
Bad trait #2: You have no financial priorities
Do you have a three year plan? Do know where you’ll be in five years time? If you don’t have a map of where you’re going, you’ll never get there. Do you want to own your own house in three years time, but can’t afford the down payment you’ll need to make? Look around, are you squandering your money on the latest gadgets (more about that later) and expensive and unnecessary expenses like home shopping delivery services? That’s probably where all your money’s going. The truth is, if you don’t change your habits now, you’ll probably be stuck in the same place in three years time.

Bad trait #3: You own the latest “must have” gadgets
The latest HD 75 inch flat screen TV… the newest Dual Core laptop… a state of the art sound system… If your list of latest purchases sounds something like this, you’re in trouble. We’d all like to own the hottest gadgets on the market, but those who do so excessively are more often than not living from pay cheque to pay cheque. Or worse, their newly acquired purchases actually belong to the bank.

If this sounds like you, one bad month is all it’ll take to put you in a pretty desperate financial situation. The solution: Stop spending on luxuries immediately! You’ll also need to rethink all those debits coming off your account.

Here’s what you need to do: First, draw up a list of the exact amount coming off your account each month and for what. Next, find the item you’re paying the most on. Since you’re probably paying the minimum each month, increase your payment so you can pay the first item off as soon as you can. Once that’s done, continue doing the same through your list until everything’s been paid in full. Then work on being more responsible. After all, the latest season on CSI will look just as good on your old TV as it does on LG’s newest release.

Bad trait #4: You eat out often
I love eating out, but I try to limit it to only two or three times a month. The “not so well to do”, on the other hand, are more likely to eat out two to three times a week. And I’m not just talking restaurants, I’m talking fast food joints too. Fizzy drinks and fried food are a staple in most of their diets. At R25 for a KFC Streetwise meal, that amounts to R175 a week! And you’re not very likely to eat on KFC all week now are you?

Why not cut back on the fat and use that money for groceries and live a cheaper, healthier life instead? Not only are you likely to live longer, you’ll be able to do so in comfort.

Bad trait #5: You wear the most recent fashion trends
Does your cupboard look like the latest display at Stuttarfords – labels, labels and more labels? Look closer, do any of these items still have their price tags on? Have you bought more than four pairs of shoes this season? If you answered yes to any of these scenarios, you’re heading for trouble. Don’t get me wrong, there’s nothing wrong with being stylish, but there are ways to do so that won’t break the bank.

So where do you start? The first place is your cupboard. Make a list of what you have – if you look after them, you won’t need to buy new ones for a while. Next, make a list of items you still need. Now follow this rule: If you need things like black pants, white shirts, a good pair of jeans – things that are “timeless” and don’t date too much – make sure you invest in good quality. That way, they’re likely to last a few seasons. More fashionable pieces should be bought from discount stores like Mr Price and Meltz. Since you’re unlikely to wear them more than one season, don’t spend a fortune on them. And one more thing, cut those store cards up. After all, you’re paying up to 25% interest every time you swipe.

Here’s to your financial freedom,

Karin Iten
for the Investment Academy