Spring is upon us; a perfect time to review the past year of financial decisions you’ve made and consider possible behavioural changes that can help preserve and grow your wealth.
Below are six tips to help you determine which habits are worth keeping, and which are not. Let’s spring clean your finances.
KEEP: Consider your financial goals
What do you want to achieve financially? Whether may be saving for retirement, your child’s education or purchasing of a property, consider whether you have an appropriate financial plan in place. If you do, review your short, medium and long-term goals to determine whether they are on track and still align with your time horizons.
Understandably, you may have had to make significant lifestyle changes as a result of the global pandemic – that’s why this can be seen as the ideal time re-evaluate your financial goals.
Many things may have changed during this time, but how to save money isn’t one of them: the only way to save money is to spend less than you earn. Taking steps to live within your means may be difficult, but are necessary to reach your financial goals.
KEEP: Review and manage your debt
Job losses or salary cuts over the last six months have likely increased consumer debt. Since the country has moved to ‘Level 1’, which allows for the majority of the economic sector to resume operations, it’s important to assess debt that may have been accumulated and prioritise paying off your most expensive debt first. The reason for this is that the higher the amount you owe, the higher the interest rate, which compounds over time resulting in having to pay back a lot more than you borrowed.
KEEP: Contribute to an emergency fund
A valuable lesson that can be taken from the COVID-19 crisis is the importance of having an emergency fund: a savings pot that can protect, and prevent, you from using a credit or withdrawing long-term investments. So, how much do you need? A good rule of thumb is to aim to save an amount equivalent to three or six months’ worth of your living expenses.
THROW OUT: Impulsive buying
A disciplined attitude and a solid budget plan should be drawn up and followed meticulously. If you may be prone to buying impulsively, it should be stopped right now. It can knock you off track and enhance financial stress. Instead, try and focus on saving regularly so that your goals may no longer be a pipedream; they can be achievable.
THROW OUT: Emotional decision-making
It’s essential to keep a level head as well: do your best to hold back emotions and replace them with logical thinking. If you succumb to emotions, it can have a devastating impact on your investments. Take some time to research investment options; objective investment management should govern your approach.
THROW OUT: Thinking you are alone
If you find yourself overwhelmed, speak to an independent financial adviser. He/she can guide you through your decision-making process and help you stick to your goals and form better financial habits.
By following these six tips, you can spring clean your finances successfully and enjoy the new-found stability.