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Money Habits

If 2021 has taught us anything about triumphing financially in these crazy times, it’s that those households that saved, invested and insured wisely, without borrowing beyond their means, made up the top 2% of financial performers in the country. What’s even more noteworthy is that this group wasn’t necessarily made up only of South Africa’s high-net-worth individuals (HNWIs) – many were middle-income households who had good money habits, who had planned for the “rainy day” and had a buffer in place.

READ MORE: Invest Like A Boss: 5 Ways To Achieve Investing Success

We have, to various extents, all had a wake-up call: good money habits, which include having solid long-term investments that compound in value over time, are the only way to ensure financial stability and financial freedom in 2022.

Here are 10 tips for financial freedom in the new year.

1/ Review your financial situation (you CAN find the time)

High-net-worth individuals tend to have little time for themselves because of their involvement in business and other activities. Consequently, financial decisions are very often postponed, yet it’s important to take just an hour or two to jot down notes that could have important long-term repercussions.

2/ “Marie Kondo” your stuff

Liberate yourself by assessing what things in your home and within your asset base you no longer need or use. We tend to add to our lives and possessions instead of removing what is unnecessary. Much of what we add doesn’t introduce value but, in many instances, does corrode and depreciate, further adding to the “expenditure burden”.

3/ Embrace financial “micro-planning” (aka go bite-sized)

According to data estimates from the United Nations Population Division, life expectancy rose from just under 50 years in 1950 to over 80 years in 2020, yet many individuals are living well into their 90s. Break your planning down into bite-sized portions. Any small win is still a win, so be objective and get rid of what you know to be wastage. 

4/ Clean up (and turn around) your expenses

Consider your properties. Is there excess? Can you use that excess profitably? What can you rent out to make additional income or sell off if it’s no longer serving you? Are you using all your subscriptions? What debit orders are going off your account that no longer serve you?

READ MORE: “5 Financial Decisions I Wish I’d Made In My Twenties” – CEO

5/ Consolidate your financial management

Do you have a holistic financial plan? Write down and reassess whether there is anything across financial planning, your investment portfolio, or fiduciary matters which you should sort out, consolidate, or trim. There may be a gap in one or the other of these areas and that gives rise to concern or opportunity.

6/ Get solid advice and help (the real kind)

Have you given thought to the long-term future? One of the best things you can do for yourself is to find a trustworthy advisor who can guide you, who you can bounce ideas off and from whom you can reliably receive global expertise.

7/ Plan for unexpected crises (because sh*t happens)

Are you planning for contingencies? For instance, how did the lockdown and advent of COVID-19 affected your finances and savings, and how are you intending to rectify shortfalls? Are you able to adapt to your new set of circumstances? Were you unexpectedly retrenched, or did you have to take early retirement and are now unable to achieve expected financial goals, so that you must either find other employment or cut expenses to balance the books? Can you reconstruct your investment portfolio? Are you taking unnecessary risks through uncertain investments that are being touted as unusually profitable? Be careful of unscrupulous financial salespeople who prey on those less experienced in financial matters.

8/ Use this simple calculation to make room for savings

If you earn R100, R70 should go to general expenses, R20 to savings and R10 into a bucket which provides for the unplanned or for the future dream. (We all need a treat from time to time, so reward yourself from the R10 bucket.) Don’t fall into the trap of spending the full R30, only to find yourself without savings at the end of the day. The 70/20/10 formula is not set in stone. What is important is starting the savings habit, even if it’s only a small portion of your salary. Saving can be investing in your business or in an investment product – as long as it’s productive and you’re able to benefit from compound interest in the long run.

READ MORE: 3 Mindset Shifts That’ll Attract More Money Into Your Life

9/ Think about your “legacy“, Queen

Ask yourself what legacy you want to leave behind one day and work backwards to find the most optimal place to start to make that a reality. Remember that one of the greatest gifts you can leave to the next generation is an estate with all its affairs in order for a seamless transition to beneficiaries.

10/ Invest for long-term freedom of choice

There is no silver bullet, but our philosophy is to worry less about what you can’t control and to take control over the things that you can influence and that will impact your long-term wealth. 

May 2022 be the year to get your financial affairs and planning in line with your dreams and goals.

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