Times are tough – fail to plan then plan to fail

Eric Streso | Eric Streso Financial Consultants | mail me |

The last few months have left South Africans reeling. A volatile and unstable economy, concerns around government corruption, crime at an unsurpassed high and soaring price, are leaving citizens disheartened and concerned about their future in our country.

Although there are no exact figures, it is clear that droves of skilled people are emigrating each day, and South Africa has a good reason to be concerned about the effect the loss of skills will mean for the economy.

Brain drain

Having barely survived yet another credit downgrade, citizens are waiting with baited breath to see if South Africa is about to be hit by another recession.

Many people are feeling out of control. The pressure of maintaining a normal standard of living, while prices are soaring, and still managing to put something aside, is at an all-time high.

According to recent consumer studies, personal debt is crushing the majority of South Africans, equating to over R1,7 Trillion owed in personal loans and finance. It is time for people to face reality. The time to trade status for savings is now, at least, if you hope to make it through the tough times.

Principles

Plan for the future

If you fail to plan, then plan to fail. A key part of maintaining a healthy financial status is to be forward-thinking. Fewer and fewer people are saving for assets such as homes, cars and retirement.

Financing major purchases with bank loans ties you down to large repayments for a far longer period of time. In fact, for many months you are paying off the interest alone, so plan ahead, and put money aside to avoid falling into this trap.

Prioritise

You can’t always have it all. The cost of living is higher, and there is no doubt that society is more status and lifestyle focused than ever.

I want it and I want it now’ is an attitude that will quickly create a financial disaster. If you can separate your wants from your needs, then compromise and plan your budget accordingly, you can avoid falling into a debt trap.

Less is more

Remember, that in the words of Mies van der Rohe, ‘less is more’, meaning that having the real essential things is preferable to having way too many superfluous things. In other words, focus on what matters.

Avoid loans

Debt is a slippery slope, and usually starts fairly simply, by taking out a loan, retail account or a credit card to help establish a credit rating.

People get lured in through the offers of good deals and low interest rates, but before they know it, they can quickly get in over their heads. It is hard to get out of a debt spiral, so think carefully before borrowing on any level.

Invest wisely

Everyone would like to see their money grow, but make sure you know what you are doing, and chat to a credible advisor, before jumping in. Consider offshore diversification for the tax and other benefits and start saving and investing as soon as you begin earning and stay disciplined.

In conclusion

The bottom line is that living expenses in South Africa are skyrocketing, and more South African’s are getting themselves into debt with loan sharks than ever before, in an attempt to maintain their standard of living.

Investing with a credible advisor or revising portfolios to include offshore diversification is crucial. Don’t wait until you are in a debt spiral, seek professional advice sooner rather than later.