The holidays and the associated spending that usually goes with the season have left many Ghanaians facing the New Year with financial hangovers. The reality is that their money problems could last well into 2022 if steps are not taken to get financial circumstances back in shape. Tavona Biza, Group CEO of Old Mutual Ghana believes taking these ten easy steps to get personal finances back in shape, could make things look a lot better and help with proper financial planning.
- Know what you owe.
Taking action to get financially fit cannot begin until you understand what your debts are. Listing loans, account balances and other debts are steps that identify how big the job ahead will be. This stage is vital because it can help avoid debt from having a long-term impact on your credit rating. Also, until you resolve the problem, the chances are that you will not be able to make savings plans.
- Stop all unnecessary spending and accounts.
Once your level of debt is known, you should stop spending on items you do not need. Closing unnecessary accounts will ensure that your spending is reduced.
- Don’t panic.
The worst thing to do is panic. By cancelling life and insurance policies, liquidating savings, or investments, you could be damaging your future security. Life, funeral, and short-term policies protect you and your family from the unexpected. Raising your personal risks by using the money to pay debts could bring only short-lived advantages.
- Pay off debts.
Attack debts by paying off those with high interest rates first. As these are paid off, the money used to settle these accounts can be used to pay off lower interest debts at a faster rate.
- Consolidate your debts.
Debt consolidation helps to simplify debts by paying off multiple debts with a new loan. Multiple debts may come with multiple interests that may be challenging to settle. As these debts are paid off with a new loan, an individual is left with a single debt, reducing payments. This means that the size of the overall debt also reduces.
- Downscale your lifestyle.
Changing your financial habits will involve taking tough decisions. Cutting back on miscellaneous expenditure and reducing spending on luxury items will have immediate benefits.
- See bonuses in a different light.
It is tempting when a financial windfall comes your way to see the income as ‘extra’ and spend it. However, any bonus or gift you receive will work for you if it pays off accounts or kickstarts a savings plan.
- Become a poly-jobber.
The term “Poly–Jobbers” refers to people who are making ends meet by creating multiple streams of income. The Covid’19 Pandemic created new habits such as working remotely. This has caused many individuals to develop new skills and interests of which can equally be a source of income, hence “poly-jobbing”. Poly-jobbers often take on projects offered on the web. The advantage is that the time required for the task and the rewards offered are negotiated upfront.
Improving your financial status as a poly-jobber means using money from the multiple sources to reduce your debts, rather than spending it on niceties. Once you are debt-free, the income can be invested or saved. Your contract of employment on your current job must of course allow for this.
- Become a saver.
To become financially fit, you should be a saver. Starting to save should be easier once your debt levels reduce. Developing a new personal budget will ensure that additional money can be paid into accounts. You will then have funds for emergencies, as well as short, medium, and long-term savings plans.
- Get expert’s financial advice.
In planning your fresh start, expert knowledge and advice can make a difference. A personal financial adviser will assist by reviewing your budget and developing strategies to help you meet your financial goals. As these strategies will be reviewed regularly and adapted, you can be sure that your savings and investments will continue to grow.
The key to changing bad money habits and becoming financially fit depends on financial education. The more you know about the right way to preserve and grow your money, the better your future will be. The time for change is now. To achieve remarkable things tomorrow means taking small steps today.
Tavona Biza is a business leader with a track record of growing and turning around businesses across the African continent. He is currently the Group CEO of Old Mutual Ghana.