I recently met up with a young graduate who was excited at the prospects of earning her first pay check. She had passed with several distinctions and yet she seemed mesmerized by the basic information I was sharing with her on how she needed to position herself now, to achieve financial freedom. As she walked away from my office thoroughly equipped to take on the world, I reflected on the conversation we had just had and thought to myself, she must be one of thousands that have graduated from the school of academia but not yet in the school of wealth. In case you too never had the opportunity to sit with a professional financial planner here are some top tips to ensure you too pave the way to your own financial freedom.
- Cash is King for a good reason. The more cash you have in your pocket the better your bargaining power. No matter what your goal might be, whether purchasing your first car, buying your first house or furnishing your apartment, if you have cash in your account, everyone wants to do business with you and it give you the power you need to negotiate better deals. So, the next time you need to make a big purchase, consider doing it for cash
- Debt is a good servant but poor a master. There are 2 kinds of debt, good debt and bad debt and yes you guessed right, there is nothing in between. Good debt is generally the debt you get into to acquire assets, income producing assets or to improve your earning capacity. Bad debt is the debt the debt you take for consumptive purposes. Good debt makes for a good servant and bad debt makes for a poor master. If you need to swipe your credit card to have dinner with your friends at a 5-star restaurant, you are better off excusing yourself than allowing yourself to be enslaved by debt.
- Save early for retirement. Most young people are victims of instant gratification and cannot fathom the idea of having to save their money now for some event in 40 year’s time. The sad reality is that only 6 in every 100 South Africans get to retire comfortably and the rest have the ordeal of having to downscale lifestyles, move in with sons or daughters in law and in the worst case have to rely on government grants. In the current economic environment, it’s already tough to get by so think twice, what legacy do you want to be remembered for by your children? Start saving as early as you can for retirement and give yourself ample time to save adequately for a lifestyle you chose not one chosen for you by circumstances.
- Be tax savvy. There are 2 sure things in life, taxes and death. You can never avoid both. We all know they are inevitable so why do we go through life acting as if they don’t exist. If you are going to invest understand the implications tax will have on any returns or dividends that you might earn. Understand, what opportunities exist in order for you to minimize on your tax liability and take advantage of them. There are legitimate ways to get onto the payroll of SARS so utilize them!
- Have adequate risk protection. We no longer live in caves and despite the advent of technology and modernization, life still happens. The important question to ask yourself is, when life does happen what will it mean for me? You want to make sure that you have enough cover in place to protect you from the possible losses or at least reduce the impact of the losses. Whether it’s motor vehicle insurance, retrenchment protection, income protection, medical aid or household insurance, if you cannot describe clearly to yourself what life would be after a risk event, it probably means you are exposed and you need to do something about it.
If any of the tips above struck a chord with you and you would like to share more ideas about them, feel free to drop me an email on Tsungai.firstname.lastname@example.org.