Measure and Modify your Money Habits
to improve your Financial Health
Are you on track to reach those goals you set in January? March is all about measuring and modifying. Without measurement you are flying blind, not knowing whether you are on the right course or whether you need to modify and make changes. There are three key questions when it comes to measuring your financial health – and you can ask yourself these questions every month. Where are you in terms of your financial fitness, where do you want to be in the future, and how you are going to get there?
A benefit of measuring your financial progress is that it boosts your motivation and accountability. If you can see your progress, you fuel your enthusiasm and commitment levels. On the other hand, lack of progress becomes a wake-up call to change your approach.
These 4 tools will help you to measure your financial health and monitor your progress:
First, build a budget – a budget is like your financial GPS, showing you where your hard-earned Rands are going, and where you may need to make changes. Measure your income compared to your monthly expenses. This will enable you to see if you are living within your means and whether you need to modify your spending or find ways to boost your income. There are some great free apps that can help you track your spending. Do some exploring and see what works for you.
Next, access your credit report – just like you wouldn’t buy a car without checking under the hood, check your credit report. It shows your creditworthiness to lenders, impacting your ability to access loans, credit cards and more. You can access a free report once a year from a credit bureau like Compuscan or Experian. Look for inaccuracies or negative listings like missed payments and dispute any errors immediately. Take time to understand your score. A good score (generally above 600) means lower interest rates and better loan terms. Improve your score by paying your loans on time and reducing your debt. It helps to reduce the number of enquiries (applications for credit facilities) and make payment arrangements where necessary.
Calculate your debt-to-income ratio by adding up all your debt repayments as a percentage of your total income. If you are not covering your expenses, you may need to explore a solution that suits your specific needs. The financial coaching program offers you five different debt solutions.
Lastly, monitor your savings and investments. Are you saving for retirement? Calculate how many years you have before you retire. Are you on track? Are you able to cope in a financial emergency – do you have an “in case of emergency” fund? Consider the benefit of a tax-free savings account.
We track and measure progress in many elements of our lives by, for example, seeking guidance from a dietician for weight loss and/or fitness expert to get fit. Your financial coach and an independent financial advisor can also help you measure your financial health and recommend changes to get you on track to financial fitness.
Sue shares how...
she was finding herself, by the 5th of each month, counting down to pay day with not enough cash to cover her expenses. In the session she measured how much money she was spending on take aways and luxury items in the first 10 days after getting paid. Now that she has changed this habit, she is finding she still has money in her bank account by the 20th of each month!”
John...
wanted to try and pay more into his bond every month so that he can retire without having the burden of a bond repayment. By meeting with his coach, they were able to measure what interest he could save and what amount he needed to pay to settle his bond in the next 24 months. He now feels on track to reach his goal.
