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Even if you have debt, you should still save some money so that you won't fall further into debt if you have an emergency, advises Fin24 user Nancy Bowring, a financial adviser and wealth manager. She writes:
Thank you for your excellent articles. I have just read about the teacher who took control of his finances.
I have always recommended that even if you have debt, you should still save some money, because often if you are just paying off debt and not putting anything away for a rainy day or the unplanned event, you have to go back into debt to get that car fixed, brakes or tyres etc.
I like the idea of paying cash for everything – it makes your spending more “real” and I believe it has been proven that you spend up to 20% less if you pay cash for goods.
I like to challenge my clients to invest more than they think they can into unit trusts and not into endowment or retirement annuity policies, because they can stop start and be accessed if needed, without incurring any penalties.
However, I keep telling my clients that they need to have a few types of savings:
1. Short term emergency rainy day – can be accessed within 5 working days – unit trusts – 3 months worth of income. (for medical shortfalls, car breakdowns, birthday presents and treats)
2. Medium term pleasure savings 6 months worth of income - can be accessed within 5 working days – unit trusts (for the end of the year holiday or bi annual clothing update, car tyres and major repairs)
3. Medium to long term savings (for the new car, overseas holiday, deposit on property ) 3 - 5 year’s worth of income – share portfolio
4. Long term savings – paying off your own property as well as investment property and investing for retirement - 10 years worth of income .
Once all 1,2,3 have been achieved then pay off property as aggressively as possible – within 5 to 10 years, and invest all 1,2,3 and 4 into investments on a monthly basis – to be managed by an astute advisor, who sees you both building your wealth together.
Get the advisor to see all family members so everyone understands when you say “no” at times, and everyone buys into the savings scheme and gets excited about it.
Most importantly, manage the costs of investment well, but remember that good advice is worth paying for.
A good investment is one that is as flexible and as accessible as possible, but you have to have the discipline not to access unless absolutely necessary.
* Any more tips to control debt? Share it here.
- Fin24
Help us help you by taking our second annual Debt survey and you could win R3 000, or add your voice by sharing your debt experiences, debt-busting tips and insights. Have a question? Ask our experts.
Thank you for your excellent articles. I have just read about the teacher who took control of his finances.
I have always recommended that even if you have debt, you should still save some money, because often if you are just paying off debt and not putting anything away for a rainy day or the unplanned event, you have to go back into debt to get that car fixed, brakes or tyres etc.
I like the idea of paying cash for everything – it makes your spending more “real” and I believe it has been proven that you spend up to 20% less if you pay cash for goods.
I like to challenge my clients to invest more than they think they can into unit trusts and not into endowment or retirement annuity policies, because they can stop start and be accessed if needed, without incurring any penalties.
However, I keep telling my clients that they need to have a few types of savings:
1. Short term emergency rainy day – can be accessed within 5 working days – unit trusts – 3 months worth of income. (for medical shortfalls, car breakdowns, birthday presents and treats)
2. Medium term pleasure savings 6 months worth of income - can be accessed within 5 working days – unit trusts (for the end of the year holiday or bi annual clothing update, car tyres and major repairs)
3. Medium to long term savings (for the new car, overseas holiday, deposit on property ) 3 - 5 year’s worth of income – share portfolio
4. Long term savings – paying off your own property as well as investment property and investing for retirement - 10 years worth of income .
Once all 1,2,3 have been achieved then pay off property as aggressively as possible – within 5 to 10 years, and invest all 1,2,3 and 4 into investments on a monthly basis – to be managed by an astute advisor, who sees you both building your wealth together.
Get the advisor to see all family members so everyone understands when you say “no” at times, and everyone buys into the savings scheme and gets excited about it.
Most importantly, manage the costs of investment well, but remember that good advice is worth paying for.
A good investment is one that is as flexible and as accessible as possible, but you have to have the discipline not to access unless absolutely necessary.
* Any more tips to control debt? Share it here.
- Fin24
Help us help you by taking our second annual Debt survey and you could win R3 000, or add your voice by sharing your debt experiences, debt-busting tips and insights. Have a question? Ask our experts.
