You don’t have to be a high earner to be financially secure and not stress about money.
You just need to get your financial house in order and live within your means.
Here are 10 things you need to sort out to ensure your financial affairs are in order and your money is working for you.
With a solid financial foundation, you will be in the right financial headspace to think about improving your earnings by furthering your career or launching your own business.
You can also watch this video on YouTube.
(full transcript)
It is not good to constantly worry about money.
These stressors make you physically ill, ruin your relationships, and affect your performance at work.
Here are 10 things you can do to reduce your financial stress.
1. Have a budget
A budget is the foundation of a healthy financial life. It ensures you have enough money for your needs, pay all your bills and live a lifestyle within your means. A good budget provides for fun and leaves room for you to save for all your goals.
2. Have an emergency fund
Saving in an emergency fund minimises the impact of surprise expenses on your budget. Emergency fund savings can pay for broken appliances, out-of-pocket healthcare costs, or travel to a funeral without you skipping bills or taking on debt.
3. Protect yourself against an inability to work
Your biggest asset is not your car or house, but your ability to earn into the future. An accident or illness can rob you of years of future paydays. If you insure your home or car, it doesn’t make sense not to insure your more valuable future earnings.
4. Avoid debt that is bad for you
It may be necessary to take on debt – to buy something expensive like a house or a car. But interest makes buying on credit cost way more than the purchase price. Debt is best reserved for things that become more valuable over time – a house or apartment – or a qualification or a small business that increases your earnings over time. Cars and appliances, however, depreciate and need to be paid off as quickly as possible. Avoid using debt for lifestyle costs – food, clothing, travel or entertainment.
Be sure you can pay off any debt you do take on and get help if repayments become unaffordable.
5. Set financial goals
Make the most of your money by saving for your goals and using time and compound growth to achieve them. The longer you invest, the higher the returns you can earn.
6. Save enough for your retirement
When you are young, it is hard to believe you will retire one day. But your older self may feel differently about working forever. Saving for retirement gives you options. You can work just as much as you want, or stop working because you have better things to do, or because you are in ill-health. You will know you have saved enough when your savings can replace your income.
7. Protect your health
Health and wealth are inextricably linked. Without physical and mental health, you can’t make money. Get advice on how to cover the costs of making sure you are always as healthy as you can be.
8. Protect your family against your death
Your financial health should include ensuring your family will be cared for if you die. That means life insurance, writing a will, planning your estate, and naming beneficiaries on your retirement fund.
9. Protect your stuff
Being robbed or hijacked or losing your home in a fire can be costly if you don’t have short-term insurance or if you are underinsured. Checking regularly that you have adequate insurance will keep you financially healthy.
10. Earn, save and invest tax efficiently
Outstanding tax or tax returns can be extremely stressful when the taxman is on to you. Being financially healthy also means paying as little tax as you legally can by maximising tax deductions, exemptions and tax-free savings.
Read more in the articles referred to in this video:
How can I draw up a budget that works for me?
How do I set up an emergency fund?
What is an income protection policy?
How do I set savings and investment goals?
How do I know the difference between 'good' and 'bad' debt?
How much do I need to save for retirement?
Why is it important to make a will?
Do I need to file a tax return?
What are the tax advantages of contributing to a retirement fund?
What do I need to know about investing in a tax-free savings account?
