Five tips to get financially fit this summer

While everybody is getting back to jogging, cycling and gyms, it is also important to get financially fit this summer as economists do not expect rising interest rates and escalating prices to go away soon.

Given the financial impact of rising inflation and interest rates combined with sluggish economic growth, exacerbated by load shedding, it is a good time to think about your financial fitness, says Neven Narayanasamy, product head at DirectAxis.

“Just as getting back into physical shape after winter will provide long-term health benefits, a good financial workout will also get you ready for the festive season, the year ahead and it will also pay dividends over time.”

Narayanasamy says inflation eats into the purchasing power of your earnings and its impact on your financial well-being becomes clear when you consider its effect over time. Cumulative inflation since 2016 means that your money now buys 34% less than it did then, while the income of most people did not grow by that much.

“Successive interest rate increases mean that people are paying more for bonds, car finance and other loans, which is also affecting how much they have left to spend each month. To carry on living within the same lifestyle, with less money, is the financial equivalent of eating poorly, drinking and smoking and ignoring the health risks.”

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Narayanasamy shares these five tips to improve your financial wellness:

• Set some goals but be realistic and set a deadline for achieving them. If you never ran more than 5km, it is unrealistic to think you will be able to run a marathon. You will have to build fitness over time until you are ready to run 42km. When setting your financial objectives, start with a series of achievable goals rather than trying to take on a huge challenge and getting disheartened. Once you won a few small victories, perhaps settling and closing an unnecessary account, you can set bigger goals, such as saving or investing money each month.

“Some financial experts recommend the 50/30/20 rule as a guide on how to prioritise your spending. It suggests using 50% of your income on essentials such as food, rent or paying your bond, spending 30% on discretionary expenses, such as clothing and entertainment and then saving or investing the remaining 20%. While this is not possible for everyone, particularly now, consider it as a guide, something to strive towards,” says Narayanasamy.

• Get financially literate by acquiring the skills and knowledge to make informed financial decisions. There is plenty of easy-to-understand, free information available online, including here www.directaxis.co.za/make-a-plan/all.

Narayanasamy says you must start by finding out more about things that affect your day-to-day financial affairs, such as understanding insurance, getting the most from your medical aid, reducing your cell phone costs or saving on electricity. As you learn more, you can expand your knowledge and learn about investing or what compound interest is and how it can work against you or in your favour.

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• Spend less than you earn. This means drawing up a budget and you can find a budgeting tool here  https://www.directaxis.co.za/make-a-plan/set-financial-goals-and-manage-your-finances-like-a-pro. Alternatively, just draw a line down the middle of a piece of paper and list all your income on the left and on the right all your monthly expenses. Your bank statements for the past few months, bills and receipts can all help you build an accurate picture of how much you spend and on what. You can then see if there are any expenses you can cut to save a bit of money. Revisit and update your budget each month.

• Try to save or invest something each month, even if it is not the 20% that the 50/ 30/ 20 rule suggests. By budgeting and tracking your expenses and avoiding unnecessary spending, you may be able to save some money each month. Ideally try to ring-fence this in something such as a tax-free savings account that will help you to avoid the temptation of spending it.

“You can also put your saving on autopilot by having a fixed amount automatically paid into a savings or investment account via a stop order. What you never see – you will not miss and you will be surprised how quickly the savings build up.”

• Track your progress. A good way to keep track is by regularly checking your credit score. There are plenty of free tools that allow you to do this, including www.directaxis.co.za/your-pulse. In addition to a credit health rating, it gives you a list of your monthly expenses and suggests ways to improve your score.

“Getting off the couch and going for that first walk, run, ride or gym session can be daunting. So can making the first step to take control of your finances, but once you started, it gets easier over time and can be incredibly rewarding when you reach your goals,” says Narayanasamy.