For 2023 it’s important to get back to the financial basics, says expert

When it comes to setting financial goals for the year, it’s time for people to get pragmatic and go back to the basics. Picture: Freepik

When it comes to setting financial goals for the year, it’s time for people to get pragmatic and go back to the basics. Picture: Freepik

Published Jan 11, 2023

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Stubborn inflation and the resulting interest rate increases are hitting consumers right where it hurts – in their pockets, according to Stian de Witt, head of financial planning, NMG Benefits.

“The combination of increasing interest rates and rising prices means consumers have significantly less money than they did a year ago. But by setting realistic goals for the year, you’ll feel far more in control of your finances in a tough economic environment,” De Witt said.

He said when it comes to setting financial goals for the year, it’s time for people to get pragmatic and go back to the basics.

Here are five tips to help you get back to the basics to start 2023 on the right financial track:

Have a budget

All financial goals start and end with a budget that is reviewed on a regular basis.

De Witt said you are probably spending much more money on your home loan, car payment and servicing debt than you did a year ago so it is important that you know what’s coming in and what expenses you have so you can budget accordingly.

Declare war on debt

If you have any debt, you should know that it’s costing you more every time the South African Reserve Bank hikes up the interest rates.

According to de Witt, you should put every extra cent you can towards paying off your debts, starting with the debts that have high interest rates. Plus you should get rid of unsecured debt, like credit cards quickly.

Have some savings

Most people are one month away from broke therefore in a volatile world, it’s vital that you have an emergency fund.

“You’ve got to have something in reserve for a rainy day. If you’re able to, it may be a good idea to have a credit facility available as a last resort if you need it. Just don’t ever access it for living expenses,” said De Witt.

“Normally allow for three to six months’ worth of expenses. If you cannot afford this, start with R10 000 to R15 000 in a separate savings account. The peace of mind this will give you is beyond words.”

Get tax-efficient

“If you have your own retirement annuity (RA) or medical aid, ask your employer to deduct these payments from your salary. The means you’ll effectively be paying tax on a lower amount every month,” De Witt said.

Review your investments

If you have investments, it’s important to take a hard look at them now and speak to your financial adviser because there are opportunities for smart investors when markets are in turmoil.

As master investor Warren Buffet says, the rich buy when others sell, and sell when others buy.

De Witt said: “An asset classes that holds significant opportunity in the coming year is residential property. When interest rates rise, the demand for rental properties rises. If your finances allow it, this is a good time to put down decent deposits on rental properties and start generating cash.”

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