Are you financially fit?
They say: “health is the new wealth”. While being able to complete the Cape Epic in your 50s, or keep up with the “youth” at your local gym are certainly worthy goals, paying attention to the health of your finances should also be a top priority for you. Just like with your physical fitness, you can change your money habits so that your money has “endurance”, and you can rethink your financial philosophy so it’s not all about having money in the moment, but rather “building your strength” for the long term. So, how does your “wealth health” shape up? If you are doing the following, you’re on the right track.
1. Your savings are non-negotiable
Your rent/bond and your car are the usual big-ticket expenses that eat into your monthly income. “Paying yourself”, in the form of investments and savings, should have the same importance as your other fixed expenses. This is a healthy mindset that ultimately keeps you in control of your finances, and your future.
2. You don’t think in terms of monthly payments
Breaking the cost of an item down into smaller monthly payments may take the short-term pain out of the purchase, but you are incurring painful interest charges along the way. Plus, add up the small debit orders or store card payments and you could have a monthly chunk of cash leaving your wallet, with very little to show for it. If you take account of the full cost upfront, you may realise you can’t really afford it – a real plus for your financial fitness.
3. Insurance is not a grudge purchase
You know that you need to plan for risks that could harm your financial situation. No-one anticipates that their path will include an accident, disability or premature death, but covering yourself with life, disability and home insurance means that your investments, as well as your family’s future, are safe.
4. Your credit card doesn’t accumulate debt
Credit cards have their perks – many come loaded with rewards and benefits that make life a bit more comfortable. They are also more convenient than carrying cash. Paying off your debt in full each month means you don’t incur interest charges, which is important. You could also use your credit card statement to get a real picture of what you spend each month. How many takeaway flat whites did you really buy last month? Check it out. Switch to DIY tea and feel the financial health benefits.
5. You plan for retirement with the help of a financial adviser
You keep it simple: you know your financial goals, you know what your personal benchmarks are, and you have a diversified portfolio that can ride the ups and downs of your life as well as the markets. Your financial adviser will also keep you on the right track and let you know if you’re falling behind in your targets. Alternatively, check out Prudential’s new Retirement Calculator to get an instant picture of what you should be saving each month.
6. You know that an RA isn’t everything
Retirement annuities are flexible and stable savings tools and come with great tax savings. But because of their strict caps, they are unlikely to help you reach your long-term financial goals on their own. The financially fit go the extra mile with a range of discretionary savings products like unit trusts that have equally useful benefits.