What does financial freedom mean to you?
To some, paying all your bills every month and having money left over means financial freedom. To others, it could mean making the most with the money you have, letting it grow for you and for your future generations. According to Investopedia, financial freedom means having enough savings, investments, and cash on hand to afford the lifestyle you want for yourself and your family—and a growing nest egg that will allow you to retire or pursue the career you want without being driven by earning a certain amount each year. If there is one thing the pandemic has taught us, it’s making sure that you have an emergency fund of savings for unplanned events like job loss, a salary reduction or even for medical treatment.
How can I become financially free?
Financial freedom can seem like a distant dream to some South Africans. Issues such as unemployment, financial emergencies, increasing debt, overspending and general day to day living can make one lose hope altogether.
No one is immune to financial challenges. Whether you are studying, buying your first car, getting married, having a child or burying a loved one, each life experience will have some sort of financial obligation or responsibility attached to it. One thing you can do, is to educate yourself on a few do’s and don’ts to make your journey to financial freedom a little smoother.
1. DO draw up a budget and list your income and your expenses. If you are wondering what happens to most of your money and you cannot account for it, a budget will clear up this confusion. Try keeping all your receipts for a month and take a closer look at your bank statement. Highlight how much you spend where, and on what. Once you have determined where your money goes you can draw up your plan for how you manage your money by budgeting. Now take your income and less your expenses. Do you have a positive or negative balance? If you have a positive balance, hooray! If you have a negative balance you need to look at where you can make some changes in your spending patterns in order to pay all your bills and have money left over to save or invest.
2. DON’T take on too much credit. Many retailers, especially clothing and food outlets, will try to entice you to open an account or take up additional credit cards. Call centre agents can be quite convincing and tell you that you have been selected to win a prize and you have qualified for this or that benefits etc., but all this flattery is done to lure you into debt. Conversely, if you need to take credit, do it for the right reasons. There may be instances when credit can be used for bigger purchases such as buying a house, car or paying for your child’s education.
3. DO pull a free credit report once a year from one of the credit bureaus in South Africa. The four main bureaus are Experian, TransUnion, Compuscan and XSD. Your credit report tells you who you owe and how much you owe them. It can also tell you if you are a good or bad payer and gives you a score for this behaviour. A good score can help you get credit in the future for bigger purchases like buying a house or a car.
4. DON’T sign a blank or incomplete contract. You could end up paying much more for a product or service/additional services if you sign a blank or incomplete contract. If there is anything in the contract you do not understand ask questions before you sign. You also have the right to have the contract explained to you in your mother tongue.
5. DO use the services of a financial advisor/broker/insurer that is licensed and authorised by the FSCA to sell you your required service or product. They can help you develop a plan to achieve your financial goals and dreams.
6. DON’T give anyone your banking details or your bank card pin. Protect your identity.
7. DO pay off your debt. If you are unable to make your monthly repayments. Call your credit providers and make arrangements to pay a minimum installment until your financial situation improves. If you have been handed over to a debt collection agency, call them and ask for a settlement amount. This is usually much less than the total amount that you owe. As soon as you get some extra cash, a yearly bonus, or are due to receive a lump sum of cash – pay and settle your debt!
8. DON’T accept the first price. Heard the saying ‘Cash is King’. Negotiate or bargain for the items you want/need ?. There are also many quality second hand online forums where you can get the things you need for much less.
9. DO think about additional ways to get an income. Making money on the side or in addition to your main stream job can assist you to pay off your debt and make your savings goals a reality.
10. DON’T give up. Paying off debt, or just making ends-meet, can be demotivating and discouraging. Think about your goals and dreams and involve the family in your plans. Your money goals will be easier to achieve when you have the support and help of those around you. Be honest with yourself about your financial situation and tackle each day one at a time.
Share these tips with your family, friends, work colleagues or the bus driver - help those around you to make better financial choices and decisions and to avoid certain pitfalls. In this way we can build a money smart South Africa.
Financial Sector Conduct Authority (FSCA)
To check if an FSP or financial advisor is authorised to sell you financial products and services, and which products they can sell you, contact the FSCA.
Call Centre: 0800 20 3722 (FSCA)
Switchboard: 012 428 8000
Fax number: 012 346 6941
Riverwalk Office Park, Block B,
41 Matroosberg Road, Ashlea Gardens,
Pretoria, South Africa 0081
P.O. Box 35655, Menlo Park, Pretoria, 0102
FSCA’s Consumer Education Department (CED)
For more consumer financial education information contact the FSCA’s CED:
Ombud for Financial Services Providers (FAIS Ombud)
Do you have a complaint against a product provider or financial advisor? Contact the FAIS Ombud for free assistance.
Sharecall: 086 066 3247
Switchboard: 012 762 5000
P.O Box 74571, Lynnwood Ridge 0040
Kasteel Park Office Park, Orange Building, 2nd Floor, 546 Jochemus Street, Erasmuskloof, Pretoria, 0048