2021 is the best time to become savvy with your money. We learnt the hard financial lessons last year and now it is time to use those lessons to build a better financial future.
Step 1 of becoming money savvy is to get clear on where you are now. This requires you to be honest with yourself. This exercise may bring up different emotions and that is okay. It is important that you feel those emotions and ask yourself why. For many people looking at their finances brings up negative emotions and can leave them feeling guilty, regretful and frustrated. Do not let this deter you. Take the time to recognize how you are feeling. This is an important step in your money journey.
Getting clear about where you are requires you to know the EXACT numbers.
- What is your current net worth? Download a template here.
- How much debt do you have?
- What is your credit score? Check out www.clearscore.com or www.transunion.co.za
- How much do you have in savings and investments?
- How much are you spending each month?
- How much are you making each month?
- How many income streams do you have?
Be honest and get clear about these numbers.
Once you know where you know exactly where you are you are in a position of power to make the necessary changes. For example, perhaps you are spending more than you earn each month. Now you can draw up a budget or spending plan and cut back to make sure you are not living above your means. Perhaps you have actually saved more than you thought but you are not earning the highest return. Now you can educate yourself and find the best investment vehicle for your money.
Getting clear will help you to see the full picture and with transparency you can now take action to change what you want to change.
Remember that you can get your children involved in this as well and help them to start learning about money. Get your teens to look at their numbers and be honest with themselves or have them do a mock up of what they would want in ten years time. Get your younger kids to calculate the grocery bill for the month and find ways where the household can cut back. Your children will not see you as ‘less than’ if you are not where you want to be financially. They will feel included in the home and appreciate being taught about money now, even if they only realise it in adulthood.
Check out next month’s blog where we will cover the next step you need to take to get money savvy!