For many South Africans, this time of year is about taking those extra precautions to guard the health and wellbeing of our households. We put extra blankets on the beds, pull out heaters and fill the bathroom cabinet with more multivitamins. However, this is also the perfect time of year to consider a financial health check.
When we get halfway through the year, sticking to our financial goals is not always as easy as it seemed at the start. Did you resolve to pay off debt? Maybe just to save a little more? How about investing some cash and watching it grow? Well, we believe that it’s never too late to circle back to those good intentions.
How to Assess and Refresh Your Goals
Planning regular financial assessments is a sensible habit, particularly in socio-economically challenging times like these. With so much uncertainty around livelihoods in South Africa (and worldwide), a financial health check gives you oversight of your economic position. This can help you set healthy financial goals that will get you through unexpected shocks and stresses.
Here are three easy steps to assess the state of your financial health and how to further encourage its resilience.
1. Check in on your credit score rating
It can be helpful to think about your credit score rating as the equivalent of checking your heart rate with an ECG/EKG machine. It indicates how consistent and reliable you are financially. This is a good place to start your review, because you’ll be able to assess whether you have any weak areas or outstanding debts that you need to resolve. After all, everybody, from banks to retailers, landlords to car dealers, decide your financial dependability based on the three figures in this report.
While by law you’re entitled to one free credit report a year from any of the credit bureaus, these can be vague and difficult to understand. Fortunately, you can also use online financial tools, such as DirectAxis Pulse, to draw a free, comprehensive and easy-to-understand credit report. What’s more, it provides information on how the rating is made up, how you can improve a poor credit score rating and also makes it simple to track your progress.
Once you have this data, you can start reviewing your budget for places you may need to tighten up and divert cash flow towards debt, savings or investments.
2. Review your income and expenses
Mid-year is a good time to check in on your budget. See whether this has become overstretched or whether you’re living within your means. Some of the assumptions you made at the beginning of the year may no longer be true. Perhaps VAT increased or the cost of fuel has hiked transportation costs. Regardless, often rehabilitating or solidifying financial health can mean cutting back on certain things to reach goals.
When you review your budget, you may find that you’re on track with paying off debt, but aren’t saving as much as you’d intended. You might want to see where else you can save on monthly expenditure to make up the shortfall. You can also consult with a financial advisor to help you better strategise where your budget should be going in general.
Just as you would consult a medical practitioner regarding your physical health, your financial health can also benefit from professional input.
3. Assess your financial goals
First and foremost, review whether the goals you set for yourself previously were realistic and practical. After all, if you’ve been a couch potato all your life, you wouldn’t start a new fitness programme by entering a marathon for the next day. Instead, you’ll train until you’re able to tackle the ultimate challenge. This strategy applies to increasing your financial fitness too.
Rather than putting all of your focus into one, huge and perhaps unrealistic goal that will take months or years to achieve, consider setting two or three more achievable ones instead. Ensure that these will ultimately lead to achieving the same end result. In other words, create a roadmap of financial milestones that you can achieve and celebrate along the way. For example, if reaching your savings target will only require a little belt-tightening in the second half of the year, then stick to your plan and make the adjustments to your budget. Come the New Year, you can bask in your achievement and set your next savings milestone. It’s all about consistency over time.
Needless to say, the economic and social upset that the world is experiencing is unprecedented. At this time of uncertainty, it’s very easy to get stressed about the future, especially if you’re dealing with financial challenges. However, taking control of your financial health can empower you to experience a better sense of wellbeing in all facets of your life.
We’re also here to assist. Get started and access your free credit score rating today.