Money could easily be the master of your life but as philosopher Francis Bacon once said, “money is a good servant but bad master”.
You need to be in control of your finances but managing a healthy budget can be difficult, especially during these difficult financial times.
Many South Africans feel that their money controls them and so we have some practical money tips from Old Mutual to help you master your finances.
Save and embrace the power of compound interest
Financially successful people plan and prepare for the future even if that means putting aside just a few hundred rand every month. Saving a fixed amount over a certain period allows you to grow your money through compound interest — that is you earn interest on your interest, enables diligent savers to grow a nest egg with even modest monthly savings.
The longer you leave money in a savings account, the more interest it accrues, so it really helps to start building your savings early.
Get smart about budgeting
To be successful at saving you need to have a plan. Learn how to create a budget based on your earnings and expenses and practice the self-discipline needed to stick to your plan.
Make a list of expenses for a year, or even further into the future. Then, prioritize these by carefully distinguishing between wants and needs, and assign them to months, remembering that savings should be your number 1 priority.
Keep debt to a minimum
Debt is the one thing most likely to turn your money into a terrible master, making you work even harder to overcome it as your debt snowball grows. If you have an emergency fund you won’t need to take out loans for unexpected expenses, but you might need to take out a small, low-cost loan to help establish a credit record — essential if you plan to take out a home loan one day.
Beyond this, you should aim to keep your debt to a minimum and only take out a loan for an emergency or an expense that will help further you or increase your worth (i.e upskilling or education).
Keep an emergency fund
One of the best ways to ensure that you don’t accrue large debt is by keeping an emergency fund, which is money specifically and solely set aside to be used in emergencies.
It’s far a better idea to earn interest on an emergency fund, than to pay interest on a loan, and an emergency fund will ensure that you won’t have to rely on a loan when a geyser bursts or your car breaks down.