We all have bad months where the unexpected happens. And this is when we look to borrow some money to get us through the month. A very well advertised and often used option are payday loans. These loans lend you money on a short term basis to be paid back by the end of the month. These loans can seem like a attractive way to get through the month. But here is why you should avoid them!
They charge very high-interest rates! Because of the high risk associated with these loans, the lenders often charge very high-interest rates which can hurt your pocket!
Similar to point 1, the lenders often charge very high fees!
They are only a short term fix, not a long term solution. A short term loan can provide you with cash flow. But you need to look at why you need the loan. Are you spending too much? Is your emergency fund to small? Or is this a completely unexpected event?
Here are are 2 ways to avoid needing to take one of these loans:
Build an Emergency Fund! An emergency fund is an easily accessible, low-risk savings account that you keep for emergency purposes. This fund is often in the form of a savings or call account linked to your bank account. This account has usually has between 1-3 months expenses saved up for emergencies.
Have some cushioning in your budget. Although this is not always possible, try to keep a small amount for unseen things in your monthly budget. This will help you cover small expenses without needing to dip into your emergency fund or debt.
Life is hard and financial decisions are difficult. And with so many adverts around that make things look great, you need to read the fine print to ensure you are not paying more than you should! Use my two tips to avoid them and in time you will be able to avoid Payday loans altogether.
We can all agree that budgeting is vital to the success of your financial journey. But that being said, it can be daunting and hard! With a world filled with Credit Card Debt and Binge spending, it is important for us to budget properly and stick to it. This will help avoid impulse buys!
One of the ways that have been very helpful to me, is using a budget planner. This simple tool has helped me save lots of money, here’s how:
Know where your money is going!
Money can be big, but can also be small. And small money can add up! By recording and analyzing all your earnings and spending in a Budget planner you can find where you are wasting money and how much money you have coming in.
Brings structure to my spending
Structure is often given a bad rep. And as a person who is not fund of structure, I have found it to be beneficial in my finances. Emotions can run our lives, but should never run our finances. They can come into a decision, but so should logic. This is why writing it down and taking a factual approach can help you make better financial decisions.
Where do I find one?
There are many apps on the internet such as 22seven, a product of Old Mutual. This apps helps you by linking securely to your bank accounts and pulling out your statements. It then categorizes your spending and earning information into an easy to understand format. It helps you set a budget and notifies you of overspending.
Another Great way is using a Excel Spreadsheet. This cost effective way provides you with almost unlimited customization and reporting. If you are like me and like excel, do this! It does mean you will need to do some manual capturing, but sometimes that manual work has a deeper impact on you!
Getting a budget is place is a great first step in building a financial plan. It will help you work out how much you can invest in your future and how much money you could be saving!
Investing in Crypto or cryptocurrency is a massive buzz word. But is it all talk or is there something to consider?
What is Cryptocurrency?
“A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.” – Investopedia
So Cryptocurrency is basically like a digital form of gold that is hard to fake or steal. It gets recorded on ledgers that are based on many servers making it almost impossible to lose records and hack. if you want a more in-depth read check out Investopedia.
Can I get a return on my investment?
Well, seeing as you get people known as Bitcoin Millionaires, I can assume so. With outrageous growth in short spaces of time, Bitcoin and other Crypto Currencies have shone over the last few years providing a high return for many, but a high loss for others.
That is something you will need to discuss with your financial advisor. The advisor will go through your investments and your risk factors to work out your risk rating. Due to the price of Crypto changing so quickly and often, it is important to have a high-risk factor.
Crypto Currency is new and exciting! It offers very good potential as an investment in the right portfolio. However it needs to be well researched and discuss with a registered advisor to ensure your investment is safe.
Zero-Based Budgeting is the new way of budgeting. It takes into account worldly factors and allows more flexibility than the traditional budget. But What is it? And how can I use it in my own life?
What is a Zero Based Budget?
A zero-based budget us “Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period.” by Investopedia. It stops the assumption that last month or period will be the same as the future or coming period. Everything starts at zero and all expenses need to be justified and explained.
This process forces managers to review every expense and justify it.
Why should I use a Zero Based Budget?
Zero-Based Budgeting can help you by cutting costs and to be knowledgeable about where your money is going. By assuming nothing and justifying all your expenses bi-yearly or quarterly, you can find wasteful spending and ways to improve your spending. Finding extra money for what you enjoy.
Add up what you are spending and divide it into categories. Such as Groceries, Health and Beauty, Petrol and Transport, Debt Repayments, Entertainment, Personal Growth/ learning, and accommodation/ rent.
Analyse each of these categories and be honest with yourself about where you are spending too much and too little money. Look where you can save and what you can improve!
Well done! You got this far! And now is the hard part….you have to start! Take it one step at a time and with this process, you can dominate your finances!
Home Loans are probably the most sought after loan in the world. Often difficult to get and expensive to pay. But is the extra cost worth it as opposed to renting? Let’s have a look!
How long will you stay in the home?
As pointed out by Fidelity, one of the most important items to consider is how long are you planning to stay in the house? For a house to make money, you would need to have a timeline of 20 years or more. This is due to appreciation, bond costs, and maintenance costs. Over this length of the timeline, there is a benefit to owning rather than buying!
Can you afford it?
Affording a house is expensive! With most banks requiring you to have 3x bond repayment as monthly income. You or you and your partner would need around R30 000 in monthly income to be able to buy an R1 000 000 house. This high level of income has made it out of reach for a lot of South Africans! Even with our low-interest rates at the moment, buying a house is still expensive.
And besides the bond, you have deposits, bond registration fees, and attorney fees to take care of. Now, this can all add up fast!
Following this, you need to consider the maintenance fees to maintain the house. From electrical work to mowing the lawn, and roof leakage all becomes your problem now.
Don’t get me wrong. The thought of owning your own house is exciting! But you need to ensure you don’t make this decision lightly. So think through it and look at all the costs involved.
Saving Money is HARD! Don’t kid yourself! It is much easier to just go and spend every penny in your account. I have done that! But what I have found more beneficial to have money left over at the end of the month.
It almost like sitting on your couch and streaming Netflix is easy and enjoyable, but working hard and climbing to the top of the mountain can be more beneficial. Creating memories that last forever of the views that are seldom seen!
But how do you do this? How do you achieve this “money in my bank account at month-end” myth? The answer is discipline and practice. Here are my money saving tips
Plan out your goals
“If you fail to plan, you plan to fail” – Benjamin Franklin
Yes, I know I use this quote too much but it is so relevant! If you don’t have a plan you won’t achieve the success you want, as you have not identified the success or goal you want to achieve. It is like running a race with no finish. You will never win! But by setting goals and planning to reach them, you CAN achieve them!
Sit down and plan your monthly budget, and what you want to spend where and why.
Stick to the plan
You have the plan! You know where the finish line is! Now stick to it. It will be hard and there will be obstacles. But keep the end in sight!
When you get to the finish, you deserve a reward. Now I’m not saying go blow all the money you just saved. But rather give your self a small reward for reaching the goal. Be that a takeaway pizza, or my favorite, a Wonder Bar chocolate! This helps you out psychological and will help you continue to reach the goal, time after time.
As I started off by saying, this is going to be hard. Especially when its cold and Uber eats sounds so good. But by practicing discipline you are gaining an invaluable life skill and financial habit that will help you grow your wealth long term.
Credit Cards can be great or can be catastrophic, depending on who you ask. They have many great aspects but the Debt aspect is what scares people away! Here are 3 questions I ask myself before getting a Credit Card:
What are the Fees?
Credit Card Fees like bank fees can be astronomically high or fairly reasonable. But look out for hidden fees such as: Late Payments, Credit Usage, Credit Limit Fee, dishonoring fee, lack of funds fee, international transaction fee and interest. These are fees listed on the report but often ignored. But they can hit you like a ton of bricks if you don’t take note of them.
That being said Free swiping along with other benefits can make a Credit Card more cost effective than other accounts.
What are the Benefits?
One of the main reasons people take out Credit Cards is for the rewards or benefits. Be it Discovery Miles, Ucount, Greenback’s, or EBucks; these benefits can add up!
From discounts on stores to discounted flights! Know what you can get back for using your Credit Card. Just make sure it was money you were going to spend anyway, as it can be tempting to overspend to get some of these rewards.
Why do I need it?
The million-dollar questions, well a good question none the less. Why do you need a credit card? Is it for cost-saving, for the benefits, to save, or to travel? Maybe its to split up expenses for a side hustle or for at home.
As long as you know why you are doing something, it will make sense to you!
Credit Cards don’t have to be scary. I have found them to be very beneficial. Just be knowledgeable and don’t spend more than you can afford. They can help boost your Credit Rating which can help with buying cars and houses in the future.
“If you fail to plan, you plan to fail”, the wise words of Benjamin Franklin. And this applies to your financial plan as well. But how do you create a financial plan?
Write it down
This may seem like an obvious one, but I myself have skipped it in past times. Writing down your goals and plans can significantly increase the odds of you keeping them. Because while you write, you think through your plan and iron out any creases. This will leave you feeling more confident.
The easiest way to save or repay is to automate the process. As diligent as we may be, the temptations of our world are real! So don’t tempt fate, automate! With all major banks offering scheduled payments and debit orders. Automate your savings and your repayments to avoid having to think about or forget about it.
Formulate your savings and repayment plan and then automate to make sure you stick to it.
Do good research upfront!
The idea of financial freedom is not to be constantly checking and obsessing over them. But rather to know where your money is going and knowing it will grow. Doing some good research upfront by yourself or with an advisor can be beneficial. As you can identify funds and plans that suit your goals, put them into automation and go on enjoying life, with a greater sense of security.
Think Long Term
No one knows what will happen tomorrow or in 10 years. But consistency has been shown to provide better results. So remain consistent and trust your research and you will be fine. If you need help with this contact a professional advisor who can help you draw up a plan that suits your goals.
Financial planning doesn’t have to be daunting or hard! Follow my easy steps and you will be well on your way to a brighter future. Remember that consistency is key.
The tough times are the last place you think about how to save money! Especially when you have lost your income or your income get reduced! There are then more important things to worry about, and you may even have to dip into your savings. And that is okay.
But Saving is not just an action, its a habit. And I believe in saving even just a minimal amount to help you save. So here are some fun, creative ways to keep the habit going!
Keep a cents jar
All those 10c, 20c, and 50c can add up to more than just a few chappies. I managed to save R10 a month by doing this. Which may not sound like much but every bit helps and every cent saved is worth more in the future!
Make it fun by customizing the coin jar, or find a piggy bank! I have a blue one I got free with a promotion a Dros years ago.
Have a swear jar
Yes, the good old swear jar! You’ve seen it on so many TV shows, I couldn’t list them all if I tried. But it can be a fun game to play if you live with friends or family.
It does not have to be a swear word but can be for any word, or in ‘New Girl’ instance, a douche bag jar.
Make it fun and a competition! With R1 or R2 or R5 penalties!
Cut down cost!
This lockdown has cost and saved people money. Less Petrol and less takeaways has saved me money. But don’t be tempted to just spend that somewhere else. Use it to substitute the loss of income. And to keep you in the green.
This is a hard time! Don’t be hard on yourself for not saving as much! Just keeping surviving!
Top Investment Tips to use right now to grow your wealth!
Investing is imperative to building wealth and 2020 is the year of opportunities. With a global pandemic form new value, now is a better time than ever to invest in top quality investments. These are my Investment tips.
1 Make an informed decision
It sounds simple; however, I have seen many people becoming “Day traders” overnight! This is the best tip I could give for first-time investors! Make an informed derision. Success in investing is understanding what you are investing in and how you are investing in it. I personally have little to no knowledge of in-depth computer software, so I cannot judge a Software company on its new software due to my lack of expertise. I would need to look and invest in something I know and understand in order to succeed. Do some research on Warren Buffet’s investment Tips and learn from his expertise!
2 Take into account Risk!
Risk is a very controversial topic with many opinions on whether to use it or avoid it. My theory is one needs to use risk wisely in order to grow. Risky investments such as an IPO (Initial Public Offering) should not make up your entire portfolio. That said however, it would make a valuable part of a well-rounded portfolio and should not be ignored.
3 Don’t Ignore Crypto
I will be honest….I was a sceptic at first. Crypto currency is here to stay and will continue to offer great returns! As per my last point, it is a risky investment, but it can be very lucrative. Just ensure you comply with local tax laws, as some countries have very strict laws that can catch one out.
4 Learn to love Bonds!
Bonds can offer attractive yields and are often more predictable and safer than other types of investments. The key with bonds is looking abroad and doing your research. Another type of bond investing is peer-to-peer lending! This is when investors loan money through an intermediary to a person who pays an agreed upon interest rate. Often these are riskier but offer high yields.
These are a few options for you to consider, more will come in the future! And make sure you speak to professionals before you invest! But with these investing tips in mind, go and dominate!