5 money mistakes we all makeThe silly season is only a few weeks away and 2013 is rolling slowly to a close. With the new year just around the corner we take a look at the top 5 money mistakes South Africans made in 2013. If you want to get your personal finances back on track in 2014 then this is the article for you.
Mistake 1: no monthly budgetPersonal finance 101: a monthly budget.
If you still have not drawn up a monthly budget then shame on you. If you do one thing next year it should be to draw up a list of your monthly expenses, savings and debt repayments and then learn to spend according to that budget. If you need help drawing up your budget there is no shortage of useful articles and templates available online.
Mistake 2: not saving enoughYou should be saving towards your retirement, an emergency fund and any short-term savings goals you might have, for example a holiday or home renovations. Speak to a personal financial planner about how much you should be saving towards your retirement and where you should be investing your funds. He/she will also be able to advise on how much you should be contributing towards your emergency fund. The rule of thumb is that you should have 3 – 6 months’ worth of living expenses saved to cover unforeseen expenses like car repairs and to protect against retrenchment.
Mistake 3: spending on your credit cardThe rule is simple: cut up your credit card.
If you are using your credit card to tide you over until payday then you need to spend some time working on your budget and learn to live within your means. If you are using your credit card to cover unforeseen expenses then you need to start saving towards your emergency fund. Bottom line is you should not need a credit card.
Mistake 4: the debt trapShort-term loans, car loans and home loans... South Africans are drowning in debt. Before you buy a new car or even take the leap and buy your first house or flat you need to think long and hard about how much debt you can afford to pay off every month after you have covered living expenses, savings and current debt repayments.
Mistake 5: Not having insuranceInsurance is about protecting against risk – the risk of fire, theft, illness and even death:
- Short-term insurance: protect your car and household content with short-term insurance – and your boat, if you have one
- Life insurance: if you are a breadwinner then life insurance is the protection your family needs against your death and the loss of your income. You also need to consider dread disease cover and disability insurance to provide financial protection against illness and disability