Step 2 – Get Money Savvy

Life is like a game of snakes and ladders. You never know what the next roll of the dice is going to give you. It could be a snake(threat) that could cause you to regress in your financial life. Or it could be a Ladder (Opportunity) to take you to the next financial level of success.

So, if life is so uncertain and the world, we live in now is so uncertain how do we mitigate the risk or the snakes in our financial future?

The first step is recognizing what some of the potential snakes(threats) could be in your financial life. Once you have recognized what they could be, you can start to plan and start putting measure in place to ensure these snakes do not set you back but rather teach you valuable lessons and help you plan for the future more successfully.

We will not all have the same snakes (threats) in or lives as we are all in different life stages. You will see I have added have a child as a financial threat. Some might say that this is not a threat but a blessing. I agree as a mom of 3 but as a mom to 3 teen – agers im perfectly aware how planning for and having children impacts my financial life.

 So, threats you might need to consider now:

  • Divorce
  • Death
  • Having a baby
  • Starting a business
  • Loss of income/ loss of a job
  • Reduce income with the same expenses
  • Lack of financial knowledge
  • Addiction
  • Disease or illness

Many of the snakes listed above can be managed with the correct type of insurance and savings in the bank. We will get more into saving in our next article.

Now let’s look at some of the ladders (opportunities) in our financial lives. When we get given a ladder (opportunities), it’s so important to ensure that, the ladder(opportunity) does not turn into a snake (threat). You will notice some of the snakes can also be ladders.

  • Furthering your education
  • Starting a business
  • Marrying a rich spouse
  • Winning the lotto
  • Getting a better paying job
  • Good divorce settlement

Recognizing ladders is just as important as recognizing snakes in our financial lives and ladders can very easily turn into snakes. Let me give you an example:

You take out a loan to start a business. That business fails and you do not pay your loan back. You will be blacklisted and have a poor credit score and no longer qualify for any further loans and you might be forced to liquidate. This will have a serious negative impact on your financial life and future. So even when life is giving us ladders, be sure to put measure in place to protect yourself and your financial future.

Sit down today and ask yourself what the potential snakes(threats) and ladders (opportunities) could be in the next 10 years. If a hereditary illness in your family is something to worry about get an income protector and funeral and life cover to protect your health and the well being of your family. If there is a threat of losing your job, start your saving now and ensure you have 6 months’ worth of living expenses saved up in the bank.

Plan for the worst and hope for the best.

Have a money savvy day

Kathryn Main

Money Savvy enthusiast

kathryn@moneysavvykids.co.za

Step 1 to get money savvy

2021 is the best time to become savvy with your money. We learnt the hard financial lessons last year and now it is time to use those lessons to build a better financial future.

Step 1 of becoming money savvy is to get clear on where you are now. This requires you to be honest with yourself. This exercise may bring up different emotions and that is okay. It is important that you feel those emotions and ask yourself why. For many people looking at their finances brings up negative emotions and can leave them feeling guilty, regretful and frustrated. Do not let this deter you. Take the time to recognize how you are feeling. This is an important step in your money journey.

Getting clear about where you are requires you to know the EXACT numbers.

What is your current net worth? Download a template here.
How much debt do you have?
What is your credit score? Check out www.clearscore.com or www.transunion.co.za
How much do you have in savings and investments?
How much are you spending each month?
How much are you making each month? How many income streams do you have?

Be honest and get clear about these numbers.

Once you know where you know exactly where you are you are in a position of power to make the necessary changes. For example, perhaps you are spending more than you earn each month. Now you can draw up a budget or spending plan and cut back to make sure you are not living above your means. Perhaps you have actually saved more than you thought but you are not earning the highest return. Now you can educate yourself and find the best investment vehicle for your money.

Getting clear will help you to see the full picture and with transparency you can now take action to change what you want to change.

Remember that you can get your children involved in this as well and help them to start learning about money. Get your teens to look at their numbers and be honest with themselves or have them do a mock up of what they would want in ten years time. Get your younger kids to calculate the grocery bill for the month and find ways where the household can cut back. Your children will not see you as ‘less than’ if you are not where you want to be financially. They will feel included in the home and appreciate being taught about money now, even if they only realise it in adulthood.

Check out next month’s blog where we will cover the next step you need to take to get money savvy!