Managing your money can be quite daunting, especially when you are young. But knowing how to manage your money from day one can be beneficial to your financial position later down the road. So what is money management? In simple terms, it’s a process whereby you budget, save, invest and record your expenses on a monthly basis, ensuring that you have enough to survive.

Do South Africans Manage Their Money Well?

Most South Africans struggle to save each month and invest their money. Many resort to utilising debt in forms of credit cards, personal loans, overdrafts and payday loans (let’s also not forget the large number of unregistered loan sharks). But besides this, surprisingly in an article released by IOL.co.za, a survey conducted indicated that 92% of the respondents are starting to prioritise their finances more than previously. With the utilisation of debt, many will struggle to manage their finances well enough to save or invest their money each month. This is due to large debt repayments taking up a significant portion of their earnings.

People Generally Want More, More And More

When you start working, receive your annual bonus, salary increase or a lump sum payment, the first thing many will do is purchase the goods and services they previously wouldn’t be able to afford. However, the ideal treatment would be to either save or invest the money each month. Building generational wealth for yourself or your family will have a larger and more significant impact in the long term. 

When People Start Earning More, They Want To Spend More

We are all guilty of spending more and “upgrading” when we start to earn more. This is referred to as Lifestyle Inflation, and with this sudden increase in spending it can make it more difficult to get out of debt, save for your retirement or build wealth. 

It’s important that you keep track of your spending, set yourself goals each month and try your best to stick to them. Additionally, trying to keep up with the Joneses isn’t the best idea and you should have your own set of financial goals and objectives. Try to see your new increase in funds as an opportunity to grow your wealth instead of depleting it.

When Earning More, Try To Maintain Your Current Lifestyle Rather Than Upgrading

Lifestyle inflation can have you live paycheck to paycheck each month, make minimum payments on your debt and finding it difficult or impossible to save each month. This may cause you to take out more debt when an unforeseen emergency happens. If you were comfortable with your previous lifestyle, then stick to it. This way the additional money you earn can be spread out towards your monthly debt repayments, or savings accounts. Additionally, as you start paying off your debt, you will unlock more that will be at your disposal and increase your ability to save or invest.

How Debt Consolidation Can Help You

Debt consolidation was created in order to assist over-indebted consumers by reducing their monthly instalments and interest rates to a more affordable repayment. This ensures that you are able to save thousands of rands each year in interest payments. Contact us and one of our debt experts will see how we can assist you become debt free.