Five hacks to help you become smart with your money

When you’re honest with yourself about your financial situation, your journey of getting out of debt becomes attainable. 

Practising smart money habits has several benefits; for instance, it gives you more control over your finances, allowing you to comfortably buy things that you need. It helps you to focus on your money goals as you won’t be spending recklessly. It makes you aware of where your money is going. And lastly, it helps you save more and plan for unexpected emergencies without falling into debt.

Those are a few benefits of being smart with your money. Now, we are going to give you tips on how you can improve your money management and stay out of debt. 

Learn how to budget realistically 

People say they budget every month; however, how many people can say they know how to create a  realistic budget. A realistic budget accounts for your debts, bills, wants, needs and more importantly, unexpected expenses. Those unexpected expenses are the reason why you reach for your credit card and wrack up more debt. So, when creating your budget, make sure you include: 

• Monthly fixed expenses e.g. rent, mortgage, cellphone contract, internet and insurance.
• Debt repayment. 
• Groceries and household essentials.
• Money for entertainment. 
• Your emergency fund. 
• Travel expenses, for example, public transport or petrol costs. 
• Subscriptions because people tend to forget or consider those small charges.
• Children or animal expenses.

Your personal finances are yours, so you need to be honest with yourself. 

Be honest about your wants because they should be featured in your budget too. Excluding all fun things from your budget just because you want to pay off debt won’t help you. As a human being, you want to enjoy the money you’ve worked hard for. But enjoy it within a budget. So set some money aside to spoil yourself every month; this will help motivate you to stick to your budget and pay off debt. As long as you use money that is accounted for and you stay within the limit you set for yourself. 

Prioritise your debt 

To reach your financial goals, you need to prioritise your debt. Because when you don’t focus on your debt repayment plan, it will always be there which can be demotivating, especially when you don’t see your numbers going down. So, create a spreadsheet or write down all your debts and how much you can pay per month. Start tracking and see the numbers going down. This will help motivate you to continue paying off your debt. Another effective way to prioritise your debt is by consolidating it. This is especially useful for people who have large balances for different accounts or high-interest rates. Apply for a personal loan online or at a branch that will be able to assist. This is a great way of squashing high-interest rate debts and having a singular payment per month. This will also relieve some of the pressure, as you only have one payment to make towards your bills. Make sure you stick to the loan repayments terms to ensure you are tackling your debt instead of racking up more. 

Start saving every month 

Budgeting and getting a personal loan in South Africa is only the first steps to getting out of debt. But, saving money aside is the key way of staying out of debt. Now, many people find it hard to save. Well, financial advisors advise that you always pay yourself first. Paying yourself first is an effective way to make sure you don’t forget to save. Another helpful tip is to automate your savings and have it move to a different account. This will ensure that you cannot touch that money unless it’s for an emergency. A finance tip for saving for an emergency is to try and save up to three to six months of your expenses. This will ensure you are able to pay your bills in the event that you lose your job. The savings fund will work as a buffer while you look for work. That way, you keep your debt in check even when you’re no longer working. 

Cancel unnecessary subscriptions

If you’re wondering where all your money is going every month, you may want to take a look at your subscriptions. If you have a gym contact or streaming service that you don’t use but are paying for, you may want to cancel it. Luckily, store account subscriptions and streaming services are easier to cancel than a gym contract, but if you want to go the extra mile, you can close any account you have recently opened. That way, you save more money that can go to your savings account and boost your savings plan. It can also be used to lower your loan amount and improve credit score. 

Use your credit card wisely 

A debt-free journey does not mean closing your credit card accounts. Keeping your credit cards open is a great way to improve your credit report as the credit bureau can see you have credit available, but you have to have the self-restraint to not use it unnecessarily. When you decide to use your credit, make sure you use it wisely. This means paying your balance in full every month to avoid racking up a bill and interest. You also need to use an amount you know that you can pay. Lastly, check your monthly statements to ensure that you can catch costly errors, like a fraud case. 

Final thought 

Staying out of debt isn’t impossible when you realise the things that put you in debt in the first place. The only way you can see those mistakes is by being smart with your finances. Remember that financial literacy doesn’t happen overnight, so take time to educate yourself on money and how you should spend your money. By consciously learning about it, you will be able to handle money better, reach your savings goals and make better choices when you need to take out credit.