Your salary is under strain, it may not be official yet
but South Africa’s economy is likely in a technical recession as power cuts intensify and global economic strain continues, whilst at the same time our salary amount remains the same.
A recession affects our future potential income and spending power. It often signals weak wage growth, retrenchments, and tax hikes.
We have seen this happening for the longest time, so how we manage our salary is crucial.
A recession also means that we must make very careful decisions about how we spend our money. If you have a lot of debt, you should pay it off first and save any disposable income you have, to build up a savings buffer.
We should also be wise and not make any rash decisions about our investments, savings, and further debt.
Starting with a budget is key, as simple as this may sound.
Here is a link for a budget template you could try and a light and easy video about budgeting.
Tell your salary where it should go instead of wondering where it went!
10 Things to consider to manage your salary better
1. Track your salary
Having a budget is not a luxury, it is a necessity! A budget is not only for those in debt but for everyone.
When doing your budget which should happen every month, don’t only track fixed expenses like rental payments or insurance premium, but daily transactions too.
Small purchases like coffee, snacks or magazines can easily add up. Try and record each rand you spend every day for a month. You will soon see just where your money is going to!
It may also be a good idea to look at a copy of your credit card and bank account statements for the last 3 months. Highlight any items purchased that was a “want”. Items that were not necessities, but you bought it anyway. I bet you will be surprised at the amount of money being spent on these items.
Once you identify these, make a commitment to at least save 50% of this amount going forward.
Your ability to earn an income is your greatest asset, so knowing your financial status is key
2. Take your blinkers off and look at your debt Vs Salary
Unfortunately, that notion “If you ignore it long enough it will go away” is not true.
Be honest with yourself with exactly how much you owe. This could consist of a bond, study or car loan and short-term credit such as credit cards, personal loans, and store cards.
3. Pay off short-term debt quickly
If you have short-term debt, work out a plan to tackle the biggest debt with the highest interest rate first.
Pay in any extra amounts you can afford, and don’t buy anything more on your credit or store card.
You should not be paying a large percentage of your salary on credit card repayments.
4. Build an emergency savings fund
Once you have paid off short-term debt, start building up an emergency savings fund, which should equal to at least three months’ full living expenses for you and any defendants.
Once the three months is built up, consider continuing until you reach six months’ worth. After this, half of the total you saved and invest to get a better return.
You can continue building your investment account every three months, whilst having a minimum of three months expenses in your emergency fund.
5. Don’t prioritise lifestyle habits over saving
There are many clever ways to change your lifestyle and still enjoy the things you love.
Quality time with friends, good food or spending time outdoors, without spending more money is something we all can do.
6. Worry less about keeping up with trends
Change your attitude about what matters most – if you focus on experiences rather than buying the latest gadgets or items, you will gain more in the end.
Avoid unnecessary purchases, like a new cell phone or car, unless you really need it.
7. Don’t skimp on the important stuff
Most people hugely underestimate what cover they would need if they became unexpectedly ill or are unable to work.
Speak to a financial adviser and make sure your basics insurance covers like medical aid, income protection and life covers are sorted out.
8. Take advantage of loyalty programmes
Most financial providers and retail stores have partners and programmes that offer valuable benefits, so take advantage of them by figuring out where you can save or get cash back.
9. Don’t spend your salary all at once
As difficult as it may be, ensure you always have some cash left over in your account at the end of the month, especially in case of unexpected expenses.
This will also help get you into the routine of delaying your spending – a good habit to have!
10. Get help if you need to
Looking for help is a sign of strength — not a weakness. It is important to remember that you are not alone.
If you are feeling overwhelmed by financial pressure, seek help.
Formulating a plan, is the first step to getting back on track with your finances.
There are many institutions offering debt counselling and even support. Do your homework, get professional advice and take charge of your finances.
Discipline in managing your salary will go along way. Yes it will be hard at first to give up some of our “spoils” but once you see the results you will feel better.
Lastly, to quote Suzie Orman “No one has achieved financial fitness with a January resolution that’s abandoned in February”
Until next time, keep safe, be money wise and choose HAPPY despite your circumstances!