Financial wellness 101: 8 steps to achieve and keep your financial freedom

Financial wellness 101: 8 steps to achieve and keep your financial freedom

– Chanelle Taylor (Director, Cornerstone Financial Planning)

Being financially healthy is not difficult or impossible. With a bit of discipline and endurance you can easily make 2019 the year in which you reach your optimal financial health. At Cornerstone Financial Planning, the financial wellbeing of our clients is our top priority and that’s why we have compiled eight useful tips to guide you on the road to financial wellness.

1. Eliminate and avoid debt…

This might be the most important step of all. Getting rid of your short-term debt (personal loans, store accounts etc) should be your top priority. These accounts often have very high interest rates and many times you only use these accounts to buy luxury items that you don’t need. Once you have paid off your debt, actively try to avoid opening new credit accounts. Instead, proactively save for larger, luxury items and buy them cash, this way you will save on interest and administration fees.

2. …but remember some debt is worth it

Long-term debt like a home loan or a study loan usually doesn’t carry the same costly interest rates than other types of debt. In a way, long-term debt can be seen as an investment as the future value of the product you get, will far outweigh the cost of the debt accrued. However, it’s important to remember to only make purchases that fall within your means.

3. Set up a budget and stick to it

Setting up a budget is easy, but sticking to it can be a challenge, especially if you are not used to budgeting. Remember, a budget should reflect a balanced and responsible lifestyle, not an extreme version of surviving on as little as possible. To make things easier for you, ensure that your budget is realistic (a monthly budget of R200.00 for groceries would be a good example of a very unrealistic budget) and that you include expenses such as social events, luxuries and unexpected emergencies. This way, your budget will be easier to follow, and you won’t feel defeated if your budget doesn’t work out.

4. Manage your expectations

Don’t expect to have a massive disposable income within a few weeks of budgeting. The road to financial wellness can be a long one and will require lots of patience. You can manage your expectations by setting smaller goals that will help you to reach your main goals. For example: if you want to get rid of all your debt, start with the smaller amounts and work your way up. This will give you tiny victories along the way to keep you motivated.

5. Save smartly for both short and long-term events

Saving is great but saving smartly is the best. Many people put all their savings into one account, often with a notice period of 32 days. Then, when sudden emergencies happen, they cannot access their savings quickly enough. For this very reason, you should have a short term and long-term savings account. The former would be for things like a broken-down car or an emergency medical payment and funds should be accessible fast, within 24 hours or less. The latter is for larger goals such as an overseas trip or a deposit on a new home and your notice period can be much longer.

6. Optimize your tax returns and use it wisely

Optimize your tax returns by placing your savings in a retirement annuity or a pension fund and make sure that you use your tax returns wisely. You might be tempted to use your tax refund to go on a luxurious shopping spree, but this will not improve your financial health. Your tax return can be a great way to pay off your debt or make an additional voluntary contribution to your retirement fund, that will substantially increase your tax refund.

7. Live stress free by knowing your loved ones are taken care of with a life insurance policy

Having a life insurance policy in place will not only improve your and your loved one’s financial future, but improve you overall wellness, because you won’t have to worry about “what if?”. Most life insurance  policies can be tailor made for you and your needs.

8. Take care of your health

Although your financial health should be a priority, your physical health is the most important. Never cancel your medial aid membership to save money or to pay off debt faster. Rather pay your debt of a little slower and save a little less each month, knowing that your health costs are taken care of. Besides, if you do not have adequate medical aid cover, all of your hard-earned savings will be used to pay your medical expenses anyway.

Did these tips help you to manage your money better? Let us know on our Facebook page. For more in-depth financial advice and assistance to, contact us today and get started on the road to financial freedom.


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