Stop Making Rash Decisions With Your Money
Many consumers are prone to mismanage their money. Discover five efficient strategies to improve your income. Start saving and investing today.
12:58 18 May 2020
For many consumers, money management is a challenge. Impulsive shopping, debt accumulation, and other blunders may cause our budgets to take a hit. The effects of coronavirus pandemic have highlighted the importance of financial cushions. Millions of people worldwide, including South Africa, have seen their income slashed.
You may wish to improve your financial situation but lack knowledge of where to begin. Without a sound strategy, the task seems daunting, and most of us procrastinate instead of acting immediately. You may decide to save or invest but then postpone it repeatedly. Meanwhile, problems will keep mounting. So, what should one do?
1. Save It
The urge to get something immediately causes us to buy on credit or take out other loans. Today, spending is easy and borrowing is accessible to many. Swiping a credit card does not create the impression of parting with your hard-earned cash. Lending institutions profit from this human penchant. Do not let it suck you into the vicious cycle of repetitive debt.
Saving is undeniably harder than spending. The best way is to use a self-billing service. Adjust your banking settings, so that a fixed amount is automatically withdrawn into a special account. This way, savings will grow without your active participation.
Remember that inflation is unstoppable. It will be slowly reducing the value of your stash if you just keep it in a jar. Hence, choose a saving method that brings interest - at least enough to cover the inflation rate. Of course, the highest returns come from investment. In this realm, there is a wide range of options.
2. Invest It
A downside of savings accounts or deposits is their modest interest. To ramp up the returns, work on your investment strategy as well. Online trading software allows anyone to trade currencies and stocks, as well as market indices and CFDs. In many cases, you do not even have to own the asset to sell it. Profit for CFD investors is based on the price dynamics for the instrument. This way, you can capitalize on market rises and falls. It can be done for a wide range of underlying assets, from stocks to commodities to cryptocurrencies. In South Africa, such services are provided by reputable brokers like FXTM. Learn more about trading online as it allows you to make a tidy profit from the comfort of your home.
3. Adopt ‘as if’ Mentality
Wait before making any large-scale purchase to check that you can afford it. For example, if you are living in a rented apartment, but want to take out a mortgage, do not sign the agreement in a hurry.
Let’s suppose the contract will increase your monthly payments by $500 (in comparison with rent). Live a couple of months as if you already had your mortgage. While still paying your rent, put aside an extra $500 every month. This will show you whether the scheme is realistic. Meanwhile, the saved amount can be used as a down payment. This will make mortgage conditions more favorable.
4. Check Your Bank Fees
Are you sure you are not getting overcharged on the services? Check the list of current fees to see if any unnecessary ones are included. Even a monthly service fee could add up to a hefty annual payment.
Another vital aspect is the overdraft. Make sure you have opted out, so the bank will not let you go over the limit. Otherwise, you may overdraw the account without even noticing, and the service is likely to be costly. To conclude, avoid spending more than you have.
Consider taking your funds to a different bank if the fees look exaggerated. Competing banks may offer more attractive conditions. These can translate into sizeable savings in the long run.
5. Pay off Your Debt
Aim to repay all of your loans as soon as possible. Create a spreadsheet with details of each product, including the interest and time left. The most expensive borrowing schemes must be prioritized. Remember that every day brings more interest. The sooner you fulfill your obligations - the better for your budget.
Every monthly payment comprises a portion of the principal amount (how much you borrowed) plus interest. Loans and credit cards may be compared based on their APR (annual percentage rate). This information must be specified in your agreement with the lender. The higher the figure - the more expensive the loan. Options with similar interests should be evaluated based on the size of the principal and the number of payments left.
These are five essential tips for anyone trying to fix their finances. Borrowed money is never free, while inflation is always present. Reconsider your source of income to get rid of any debts faster. With thoughtful strategies for saving and investment, you are sure to see positive results soon.