Make sense of your cents

Here are some tips to get you moving forward with your finance:

Tackle the big guy first

When confronted by a gang of bullies, take out the biggest guy first. The idea is to take out the most dangerous bully while you still have the energy. Approach your debt in the same way – prioritise and then eliminate.

Attack the debt with the highest interest rate, pay-off the non-tax deductible debts (like your bank loan and credit card), and then pay off those smaller, often unnecessary debt that eats away at your cents (like clothing accounts).

Plan it out

Managing your money means making choices. You will never earn enough money for all the things you would like, so decide what is important to you – and plan it out. Planning it out means drawing up a budget and sticking to it to the best of your ability.

Avoid the pitfalls

There are two major pitfalls when it comes to finances. One, we purchase more debt. This means we tend to buy things that will cost us an “affordable” amount over a long period. Purchasing furniture on credit is a good example.

We have fallen into the trap of buying on credit and paying it off. While the monthly payment seems reasonable, the interest rate we’re paying is money that could’ve been spent better in an investment. While we all need a couch to sit on, think twice before buying on credit – look at other options such as saving for the item (and buying cash), or purchasing something second-hand.

The second pitfall is the small expenses that seem insignificant, such as buying a lunch instead of packing one. These all add up over the months. We often fail to save our increase or bonus because our standard of living adjusts upwards to our income level. Rather keep your standard of living as is – and save those extra cents.

Start off small

Instead of buying a daily (unhealthy) snack, like a packet of chips, drop those coins into a jar and see how much you can save. You won’t be able to save up if you don’t start. See which option of saving would work best for you – and start! It is, after all, about getting ahead.

LifeAssist, your guide to financial wellness

LifeAssist, your Employee Wellbeing partner, offers employees access to financial coaching and counselling. LifeAssist provides you with access to financial literacy as well as one-on-one telephonic coaching regarding budgeting and credit restructuring recommendations.

 

Source

http://www.investopedia.com