13 Nov Financial Planning for Young South Africans

Financial planning is vital to ensuring future prosperity. With our unemployment rate and and rising costs of living, stewarding your money well and using it advantageously is key to safeguarding yourself against unforeseen events and reaching your financial goals.

Let’s discuss how young South Africans can grow their money, keep themselves financially fit, and manage risk.

In summary, you should:

• Plan for your future goals
• Manage risk
• Save and budget wisely
• Become financially literate
• Use credit well
• Find extra income
• Manage your debt

Let’s discuss this in more detail.

Plan for Your Financial Goals

We all have financial goals, whether that’s buying a car, or a house, being debt-free, or having an emergency fund. To reach these goals, you must plan for them using the SMART goals method. That is, make them specific, measurable, achievable, relevant, and time-bound.

For example, say you want to save for a 20% deposit for an R150 000 car (R30 000) and you make R15,000 per month. If you saved R3,000 of your income every month for 10 months, you would reach your goal.

Manage Risk

When we’re young, we invincible, “I don’t need insurance”. The truth is, your health can take a turn for the worse quickly, especially if you’re prone to taking risks. Take out basic health insurance, even if that’s just a hospital plan. This way, you won’t fall into debt if something does happen. This goes for vehicle insurance, too. No matter how carefully you drive, someone could crash into you or you might need a new tyre. Repairs are expensive, take out insurance.

You should also start planning for retirement early. Most South African employers don’t contribute to retirement at all. It falls on you to manage your retirement. Set aside 10 to 20% of your income toward retirement each month. This way, when you reach the age of retirement, you won’t be stuck.

Save and Budget Well

Saving is an important part of ensuring financial wellness. You deposit your savings into high-yield savings accounts. These render 3-5% compound interest per year. The longer you leave your money in these savings accounts, the more money you’ll make.

Budgeting is also important to maintaining good financial standing. This way, you’ll know where your money goes each month and be able to lower your spending.

Become Financially Literate

Knowledge is power. Invest time into learning about debt, credit, investment, saving, and how the South African financial and banking system works. This way, you’ll be able to make informed decisions about how you spend your money, who you bank with, and how to take out credit.

Use Credit Well

When you first take out credit, maintain a low utilisation rate. This shows credit providers that you’re responsible with credit, making them more likely to up your limit. The higher your credit score, the easier it will be to access large amounts of credit for purchases like home loans or auto loans.

Find Extra Income

While this is easier said than done, young South Africans can leverage the internet to boost their income. Gen Z (born between 1997 and 2012) is often hailed as the digitally indigenous generation–they’ve grown up surrounded by technology and have an innate understanding of online culture, tools, and trends. Use this to your advantage by becoming a social media manager (85% of companies have put more budget toward this means of marketing) or promoting affiliate links on a channel where you have a large channel. Amazon Associates Central is a good place to start.

You might also consider tutoring a subject you studied, babysitting, or providing another specialised service.

Manage Your Debt

Try to put income towards debt repayments every month. Pay off high-interest debt (like credit and store cards) early to avoid it accumulating too much. It’s also important to pay off your student, vehicle, and personal loans.

If you’re struggling to make ends meet because of financial overcommitment, contact True North Debt. We’ll negotiate lower repayments, interest rates, and legal protection on your behalf through a process called debt counselling.