5 Tips for achieving financial security

Good financial habits are essential to help you build wealth, weather financial storms, and achieve your life goals.

Cherise Erasmus, an associate financial planner at Crue Invest, outlines five money practices that will stand you in good stead as you work towards financial freedom.

Tip: How you manage your credit affects your financial health. View your credit score to see where you stand.

1. Learn how to budget

Creating a budget – and sticking to it – is the most important financial habit you can develop. “You need to understand what ‘living within your means’ looks like in your circumstances,” says Erasmus. 

“First and foremost, ensure you’re not spending more than you earn, because that means you’re going deeper into debt every month,” she stresses.

2. Build an emergency fund

An emergency fund can provide you with cash if something breaks, you need to take an unexpected trip, or you face a doctor’s bill that’s not covered by your medical aid.

“Without an emergency fund in place, you’ll most likely find yourself taking out a loan to cover such expenses, and this will come at a high interest rate,” Erasmus cautions.

She adds that an emergency fund is particularly useful in a crisis - for example, if you’re suddenly retrenched and need time to find another job.

3. Manage your debt

Having debt is nothing unusual, but staying in control of your repayments can be difficult. Trying to extricate yourself from debt may take time and make it hard to save.

“I recommend first paying off your most expensive debt – that is, the debt with the highest interest rate – as this will save you money by reducing interest,” Erasmus says.

Tackling your debt is vital for your financial wellbeing, since “bad debt” might make it hard to access credit, for example, a home loan.

4. Invest for the future

It’s good to enjoy your life in the present, but it’s crucial to balance your current financial obligations with savings to fund your future goals, such as retirement.

“Calculate which option makes more sense mathematically – reducing your debt, or investing your funds for the long term,” Erasmus counsels.

“Put funds away if you can, bearing in mind that it's important to find a balance between saving for the future and paying off your debt,” she emphasises.

5. Finetune your financial plan

Having a financial plan will help you manage your cash flow appropriately, control your debt, and invest enough for the future.

“If you spend with the knowledge that you’ve also taken care of your future self, you’ll have peace of mind,” says Erasmus. 

“Update your plan as your circumstances change, for example, by increasing your investment contributions, or making sure you don’t have too little – or too much – insurance for your needs,” she concludes.

Tip: Planning your finances provides peace of mind. Use our convenient budget calculator to get started.