How to tell if you spent your money wisely this year
Not many people take the time to review their finances at the end of the year; however analysing the way that you managed your finances can help you form the basis for your financial plan for the upcoming year.
Eunice Sibiya, head of consumer education at FNB outlines a few ways to measure if you were successful at managing your finances in 2016.
You paid off some debt
Most consumers need debt at some point in their lives and not all debt is bad debt. However, according to the National Credit Regulator 10.3 million South Africans are struggling to meet their monthly debt repayments; which has an adverse effect on many things, but most importantly your credit score.
“The advantages of paying down your debt and managing it effectively cannot be denied. Less debt means that you have a higher disposable income to do things that will be more beneficial to you in the future, such as saving,” says Sibiya.
Most importantly, if you paid off some of your debt this year – you set yourself up positively for the New Year, and you may have even set yourself up for building long-term wealth.
You have short term, medium term and long term savings
Your future financial health and freedom rests quite strongly on how you are saving, and a good savings plan should include short, medium term and long term savings and savings goals – which will help to keep you motivated.
A short term savings goal could be anything that you want to attain in as little as three months to three years. Saving for this would ensure that you don’t over-extend yourself to purchase an item that could be expensive; additionally short-term savings cushion you from financial distress should an emergency or an expensive unexpected occurrence take place.
A medium term savings goal would typically span anything from three to six years of savings; and would include you saving for bigger more expensive things like a holiday overseas or saving for a deposit for a new car.
Long term savings are typically longer than six years and would include things like saving up for your child’s education or for your retirement.
“Saving your money is like building yourself a safety net, for when times take a turn for the worst, and it’s also like giving yourself a spring board – to jump and reach your financial goals whatever they maybe – whether it’s a holiday, or new furniture for your home. It can all be achieved with your savings,” says Eunice
You drew up a budget and you stuck to it
A budget is like your financial plan, and if you stuck to your budget this year – then you might have reached a few of your financial goals.
“It’s very easy to underestimate a budget because you hear it so many times that you need to draw one up. However if you consider that a budget will allow you to have a view of everything that you are spending your money on; including expenses that are often overlooked such as birthday gifts or those that don’t happen on a regular basis such as new tires for your car. Then you start to see why a budget is important and how it helps you navigate your finances,” says Sibiya.
So if you managed to stick to your budget this year – give yourself a big pat on the back because chances are your finances didn’t take an unexpected knock. And if they did – you were well prepared for it because you’d included savings in your budget.
You have enough money saved for the festive season – and for the new school year
According to a 2015 Deloitte survey over 55% of consumers are willing to spend more over the festive season as they want to enjoy the holidays.
“The festive season is meant to be enjoyed – however this should never be at the expense of your financial wellness – so saving small amounts of money during the year and finding creative inexpensive activities to keep you and your loved ones busy is the best way to curb excessive spending at this time of the year,” cautions Sibiya.
This is also true for when the New Year rolls around. Ideally you should have money set aside for the back to school rush, transport money and groceries since your last salary would’ve been in mid-December.
“Ultimately reviewing your finances at the end of the year will also help you to understand your approach towards your finances and will allow you to identify and rectify any bad habits in this regard – again this will serve you well as you go into the New Year,” concludes Sibiya.