April is Freedom Month in South Africa, and what better way to celebrate than by focusing on achieving financial freedom? Financial freedom doesn’t mean being rich; it means having control over your finances and being able to make life decisions without being overly stressed about the financial consequences. ‘Financial freedom is about being prepared for whatever life throws your way,’ explains Babalwa Nonkenge – Nedbank Head: Retail Investments, ‘and having control over debt, money in the bank, and a plan for achieving the future you want.’ She offers 5 actionable steps anyone can take to achieve the financial freedom they desire.
1 Master the art of budgeting. Babalwa points out that budgeting is the cornerstone of financial freedom. ‘Contrary to widespread misperceptions, it doesn’t need to be complicated or boring,’ she says. ‘It just means assigning every rand a purpose and then keeping track of how well it delivers that purpose.’ Fortunately, there are many online tools to help you do that, like Money Tracker on the Nedbank Money app. This free digital budgeting and money management tool helps you track your income and expenses, set budgets and make the most of your finances every month.
2 Eliminate debt. Debt is a significant hurdle on anyone’s journey to financial freedom. ‘Your income is your most powerful wealth-building tool,’ Babalwa explains. ‘And you can’t reach your financial freedom goals if a substantial portion of that income goes towards debt repayments.’ She recommends using the snowball method. This involves listing your debts from smallest to largest and then focusing on paying off the smallest debt as quickly as possible, while making the minimum payments on the others. Once the smallest debt is paid off, the payments previously committed to the smaller debts can be committed to the next largest debt creating a snowball effect until all your debts are settled. It is a good idea to start eliminating unsecured debts such as clothing accounts.
3 Set financial goals. Setting financial goals with deadlines is crucial to achieving financial freedom. Start by defining your short-, mid- and long-term financial goals. Short-term goals could include creating a budget or paying off a small debt, while mid-term goals might focus on saving for a deposit on a house or starting a business. Long-term goals could include saving for retirement or your children’s education. ‘When setting goals, make sure they are realistic and achievable,’ Babalwa recommends. ‘For example, instead of setting a vague goal like ‘save more money,’ be specific and say ‘save R5 000 in the next 6 months.’ She suggests writing your goals down and reviewing them regularly to stay motivated and on track.
4 Build an emergency fund. An emergency fund is a crucial safety net that helps you manage unexpected financial challenges without having to incur debt. Most financial experts suggest aiming for emergency savings of 3 to 6 months’ worth of living expenses. This may seem daunting, but it is achievable with discipline and patience. It’s important to have this emergency money in a savings account that is separate from your other long-term savings and allows you to access the money quickly if you need to.
5 Plan and save for bigger purchases. Whether you’re saving for a dream vacation, a new car or a home renovation, planning can help you avoid debt and achieve your goals faster. Start by setting a specific savings goal and determining how much you need to save each month to reach it. Then create a dedicated savings category in your budget and choose the most appropriate savings product. ‘The Nedbank Notice Deposit Accounts are great for saving for significant future purchases because by design you are required to give a certain number of days’ notice to before you can withdraw your money,’ Babalwa explains. ‘And this built-in delay helps prevent impulsive spending and keeps you focused on your l goals. Plus, Nedbank’s market leading interest rates help you money grow your money faster.’
Babalwa emphasises that achieving financial freedom requires dedication, sacrifice and time, but she is adamant that the results are well worth it. ‘Not only will you have the ability to take control of your finances, but you’ll also enjoy a life without the financial stress that so many people experience every day, and there’s no better feeling of freedom than that’, she says.
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