With 2020 fast approaching, you may be considering some New Year resolutions. Losing weight, giving up smoking, taking up a hobby – these are all common things people speak of when it comes to New Year. But, what would be a really good New Year resolution – and one that can really make an impact – would be to address your finances and improve your financial literacy. What better way to live your year than have true control over your money matters, allowing you to spend, save, budget and invest more efficiently?
What do we mean by this?
Financial literacy is defined by Investopedia as: “the education and understanding of various financial areas including topics related to managing personal finance, money and investing. This topic focuses on the ability to manage personal finance matters in an efficient manner, and it includes the knowledge of making appropriate decisions about personal finance such as investing, insurance, real estate, paying for college, budgeting, retirement and tax planning.”
In a recent blog by Wonga, they categorise financial literacy into four different areas. This includes debt, budgeting, saving, and investing. They say, “It’s understanding how to build wealth throughout one’s life by leveraging the power of these pillars.” So, let’s start with debt. This will be a big one for many South Africans, who may have taken out loans, or stacked up debt on credit cards. Addressing debt should be a priority for many people that want to get on the right path with their finances. Draw up a plan of what you have left to pay, and how you suppose you might achieve this. Try and be realistic – there is no good in plumping for numbers when you know you won’t be able to reach those goals.
The second pillar of financial literacy you’ll want to consider in 2020 is budgeting. Budgeting is all about organising, so get a spreadsheet up and running showing all your incomings and outgoings, so you can get a full view of what you have each month. You can make small easy changes, like not buying big brands when it comes to groceries, or budgeting only a certain amount each month for socialising.
Finally you will want to look at saving and investing. When you have your debt under control or paid off, and you are managing your monthly budget well, it is time to consider the future and saving should be a number one priority. Consider what savings account will give you the best return, and also research into what you could possibly invest in to make your money go further. For instance, stocks and shares ISAs are a good, easy way into investing. You might also consider premium bonds which are risk free and could get you a tidy sum.
When it comes to financial literacy in 2020, it doesn’t have to be full of hard work, sacrifice or excess worrying. As long as you address any debt issues head-on, and are realistic and up for the challenge, it could be a great way to see in the New Year, and could make Christmas 2020 a much more manageable and comfortable financial affair!