By Tamara Oberholster
Adulting is hard - especially when it comes to money! And now, with everyone feeling the financial crunch, it’s even harder to balance the books. We’ve compiled a little checklist for you to see how well you stack up when it comes to financial adulting. Here are six signs that show you’re headed in the right direction – how do you compare?
1. The idea of managing your money doesn’t make you panic
Some people grew up in families or cultures where talking about money was considered rude. Others feel so overwhelmed by their financial situation that even thinking about it is stressful. And some people feel like they don’t have enough money to bother thinking about financial planning.
Whatever your financial baggage, the first step to dealing with it is to stop avoiding it. Yes, it’s another hard part of adulting, but it’s the first step towards financial freedom.
2. You have a budget
A budget is the most basic tool you need to take control of your finances. Tracking your income and expenses helps you to see where you may be overspending, how much money you have available for saving and investing and what debt you need to prioritise paying off. It is the starting point for developing a personal financial plan.
In our Truth about Money blog, you can find a step-by-step approach to setting up and managing a budget.
3. You’re actively dealing with any debt
Debt gets a bad rap, and for good reason, with the SARB estimating that South Africans spend an average of 75% of their take-home pay servicing their debts. However, some debt is worse than others.
“Good debt” is debt that helps you generate income and build your net worth. This could include a loan for education, your business or a home. Bad debt tends to be money you owe that you’ve used to pay for assets that are going to lose value over time – like clothing or electronics.
While it’s best to steer clear of debt wherever you can, most people can’t avoid it entirely. And whether your debt is good or bad, you need to have a plan to pay it off. One of the big reasons is that when you get a loan or pay with credit, you’re not just committing to paying back what you borrowed, but you also have to pay the interest on that amount, as well as any account or administration fees.
If you need to develop a plan for busting your debt, we have a bank of useful advice and resources – start here if you’re worried about how you will repay your debts.
4. You plan for when things go wrong
The future is unpredictable! Life can change in seconds, whether it’s for better or worse. “Adulting well” means doing your best to plan for when things go wrong.
Insurance helps protect you financially when the paw-paw hits the fan. You can insure almost any part of your life, but not every type of coverage is right for every person.
Most people should consider cover for their lives (especially if they have people who depend on them financially), health and property (which could include homes, cars and other possessions).
5. You have emergency funds saved up
An emergency fund helps you to deal financially with life’s sudden events (especially things not covered by any insurance policies you might have), without dipping into your investments.
You should aim to save up between three to six months’ monthly expenses in your emergency fund, depending on your personal circumstances. If you’re self-employed, you might need to consider saving even more.
6. You think about the long term as well as the short term
Setting financial goals helps you to work towards what you want to achieve and to measure your progress. It also helps you to arrive at each new stage in your life as financially prepared as possible, whether that’s pursuing further education, having children, taking care of family members or eventually retiring.
It’s also critical if you want to start building generational wealth, so you can help to provide for future generations of your family, even after you’re gone.
If you don’t feel like you’ve been managing your money like a savvy adult up to now, don’t worry – today is a perfect day to get started. A great starting point is our Truth About Money financial management course. And remember, like most other parts of adulting, there’s no single path to success when it comes to your finances – you just have to keep on working at it!