South Africans have a deep-seated need to find stability in order to gain control over their financial health and to be empowered to live the lives that they aspire to.
By Bongani Khulu, Omni-channel, Engagement & Sales Executive, Liberty
In April South Africa celebrated Freedom Day and focused on Consolidating and Safeguarding Democratic Gains as a theme for Freedom Month as we are reminded of the sacrifices that have been made in the past to ensure South Africans can enjoy basic rights, freedoms and liberties.
In the current socio-economic landscape, one of the most pressing desires is the freedom to be financially free, or financial freedom, aptly adopted by Liberty, whose vision is to enable financial freedom for South African individuals and families.
As we take a moment of reflection over transformation in progress, 32,7% in Q4:2022 of the South African unemployment rate is layered by the very high levels of poverty, few high-income earners and a relatively small middle class. As a global phenomenon, the economic environment has been unkind and South Africans have a deep-seated need to find stability in order to gain control over their financial health and to be empowered to live the lives that they aspire to.
Having control of their finances, avoiding debt, and saving for retirement are some of the simpler ways to prepare for a financially stable household, and yet only 6% of South Africans are adequately prepared for retirement. With a high rate of inflation and price increases ongoing as an aftershock post pandemic, people are also dipping into their pension funds for reprieve in addition to depleting their savings and borrowing money to get by.
As a guideline from one of our Liberty Financial Advisers Maxine Muller, here are some solutions for building financial freedom and stability into your budget, while navigating the economic environment we face.
Strive to pay off debts and remain in control.
Paying back debt is tough and calls for discipline and sacrifice. This is a hard commitment to make but one of the most effective first steps towards financial stability. While statistically South Africans are in a habit of barely surviving till payday, paying debt seems to be a much more difficult ask than spending most of their income on paying bills and buying goods days after getting paid.
Being free from debt would mean that money could go towards other comforts and reduce money spent on interest as well.
Understanding then in addition that South Africans do struggle when servicing debt, with some unable to meet their financial obligations, it helps to communicate regularly with those to whom money is owed, to avoid defaults and credit judgements.
Commit to saving and stay the course.
Few people outrightly commit their spare money to savings at the end of the month, but changing some long-term spending habits can shift this way of thinking. Simple advances in planning like saving on your shopping budget to have more money at the beginning of the month, for example, will help people to make savings commitments sooner.
In addition to saving money on your own accord, it pays to make use of other vehicles that make saving simple, like a tax-free investment account which allow you to save up to R36, 000 annually. There is also a lifetime limit that is set at R500 000 by SARS. A lot of people think saving is difficult, but banking and savings apps offers you direct access to save and invest at your convenience because they are automated and surprisingly easy to use.
Stay invested and have a recovery plan.
For those whose pension funds have taken a knock because they desperately needed extra money to survive, they may find themselves contemplating to retire a much later than they had planned. Thankfully, many pension funds will now allow clients to increase monthly payments, even by small amounts, which over a long period of time will make a significant difference and make a recovery possible. It's not hard to see that by increasing payments by even a mere R100 a month, will make a significant difference over 20 years.
Plan with an Adviser and seek financial freedom.
No salary is too small to plan with financially and along with these useful tips, it pays to always have a plan with your money over the longer term. Speaking with a Financial Adviser about your current financial situation and personal needs may offer you meaningful insight on how to navigate your financial needs planning process and experience the kind of freedom your finances are able to afford you.
Although these solutions and tactics for financial planning might be hard to achieve, these are worth the diligent effort and may see South Africans in better control of their current reality and better navigation towards financial freedom.
Disclaimer:
This article does not constitute tax, legal, financial, regulatory, accounting, technical or other advice. The material has been created for information purpose only and does not contain any personal recommendations. While every care has been taken in preparing this material, no member of Liberty gives any representation, warranty or undertaking and accepts no responsibility or liability as to the accuracy, or completeness, of the information presented.
Liberty Group Limited is a licensed Life Insurer and an Authorised Financial Services Provider (no. 2409).