As we step into the remaining half of the year, now is the perfect time to take charge of your household finances according to the plans you had set for your family at the beginning of the year. If your finances are complex, enlisting a financial adviser is advisable. However, for many people, their money matters are straightforward enough that they can confidently conduct a review themselves. Think of it as being your own chief financial officer, empowered to make informed decisions. According to Ricardo Sardien, Group Chief Finance Officer at Old Mutual Botswana, to do this right, you will need to deal honestly and openly with each aspect of your finances. The below provides a clear breakdown of what this could look like for most people. 

Are you following your set monthly budget? 

Maintaining a budget, which tracks money coming in and going out, helps you avoid unnecessary spending and free up cash to reduce debt and save for financial goals.  

“By tracking your daily spending patterns, you may be surprised to discover that insignificant purchases add up to a substantial amount over time,” Sardien says. “For instance, spending P30 on takeaways every working day translates to P150 per week, P600 per month, and a staggering P6 600 annually.”  

Compare your current total income and expenses to see if your costs are higher than your income and cut items you can do without.  

Is your debt becoming overwhelming? 

One area you need to monitor carefully is how much of your income is going towards paying off debt. According to debt counsellors*, if this percentage is over 40%, you are in danger of becoming over-indebted.vSardien offers the following debt-alleviation tips:  

• Close unnecessary accounts 

Cancel credit cards and store cards that are not essential for your daily purchases. This will help you to avoid impulsive spending and stay focused on your debt-repayment goals”.  

• Prioritise high-interest debt. “Create a list of your debts, starting with those carrying high interest rates, such as credit cards. Allocate extra funds towards paying off these high-interest debts first. As you settle each debt, you’ll free up more money to tackle the remaining ones,” Sardien says.  

• Don’t fund consumables or entertainment with credit.  

Ideally, debt should be used to fund only big-ticket items and appreciating assets such as a property. Using debt for groceries is likely to land you in financial trouble,” Sardien says. 

• Consider getting help.  

If you are in trouble, the first step would be to approach a lender to restructure a loan. You may also consider consolidating your debt or entering debt review if you are in deeper trouble,” Sardien says. 

Review your goals? 

Check if you are still on track with your financial goals set at the beginning of the year and make adjustments where necessary. Based on your findings, set new goals if necessary. Ask yourself if your goals are still relevant or realistic, and make an appropriate decision based on your analysis. Find tactics to motivate yourself to stay the course. For example, share your goals with someone you trust to help you to keep yourself honest. 

If you belong to a company pension fund, you will accumulate savings through contributions deducted from your salary. You should also save for shorter-term goals, such as a deposit on a property or the education of a child, as well as emergencies, such as fixing a geyser leak or getting new tyres for your car. 

Different products cater to various needs. For example, a bank savings account may be adequate for short-term emergency savings, but for longer-term goals, such as a deposit for a home or car, you would need a product that includes share investments, such as a unit trust fund. Sardien recommends earmarking at least 20% of your income for savings. “This helps build a financial cushion for the future and can provide support to achieve a comfortable financial journey,” he says. 

Have you checked your insurance cover? 

You also need to review your insurance. Is your family, house and other assets adequately protected in the case of disaster, death or loss of income? Short-term insurance covers your property and belongings, while long-term insurance – life and disability cover – provides for your family should anything happen to you. “It is always advisable to review your policies at least once a year and also each time there is a life-changing event in your family, such as welcoming a new child, to ensure that they are still providing for your specific needs,” Sardien says. 

Do not forget your will.  

Finally, you must ensure your will is valid and current. “If you die without a valid will, you will die intestate, which can create enormous problems and hold-ups for the loved ones you leave behind,” Sardien says. He concludes: “Taking all aspects of your finances into consideration honestly and openly and following a disciplined approach to managing your money is a sure way to prosperity”.