Your journey to achieving financial success

 

Achieving financial success in today’s economy is not an easy feat, but it is possible. Financial success takes on a different meaning depending on who you are speaking to, but for us, it means to live within your means, have minimal to no debt, have money saved up for your future, and to be able to financially survive any unforeseen events or catastrophes.

 

Basically, financial success is having money readily available when it is needed.

 

Sadly though, many South Africans have no idea how to achieve this. So, to help we have created an easy-to-implement five-step process that you can follow, no matter what your current situation may be. Remember too, that our expert Kudough coaches are also available to guide you through each of these steps: 

 

 

STEP 1 - Fix your credit score

 

Depending on your situation, your credit score could be great, average, or poor. Regardless, you should always know what your credit score is and whether it is going up or down, and why.

 

If your credit score is low due to bad financial choices, unforeseen life events or reckless lending, find comfort in knowing it’s not too late to take control. An understanding of how your credit score is calculated will also help you make better decisions. Here are a few insights to ponder over:

 

• You need to regularly check your credit score and immediately dispute any inaccuracies if you notice any. If you have judgements or defaults, make payment arrangements with your creditors at reduced rates for them to be removed.
• Your credit score is determined by how well your specific credit obligations are being met, in other words, are you paying your accounts on time, and are you paying the amount you committed to paying.
• While having some credit helps to build your credit file, using too much credit available to you will negatively impact your credit score. For example, your credit score will be lower if you use half or more of your available credit.
• Think carefully before closing old credit accounts. The amount of time you have had your various credit facilities (like credit cards and store accounts) can benefit you, especially if you have met your credit obligations.
• Be cautious about what type of credit you sign up for. The type of credit you utilise most definitely affects your credit score. Payday loans for example will not reflect well on you, whereas a credit card or personal loan that you have been managing well and pay money into on a regular basis will count in your favour. The general idea is to have a combination of long and short-term credit options that work together to improve your credit score.

 

In summary, to achieve the objectives of step 1 – fixing your credit score, you should always make repayments on time, formulate a repayment plan, not use more than half of your available credit, try to keep at least one account open, and don’t randomly start closing accounts you have had for a long time.

 

Also, if you feel that your credit score is inaccurate, or if there have been unforeseen changes, you should lodge a dispute with the relevant credit bureau to correct it if need be.

 

STEP 2 - Reduce your debt

 

Like many, you may think reducing your debt is as easy as paying your required monthly repayments. While this is important, there is so much more you can do to reduce your debt. Here are some tips:

 

• Formulate a budget. This will help you to monitor your expenses and determine which expenses are unnecessary or can be reduced.
• Know what interest rates you are paying and focus on paying off your high-interest debts first.
• As soon as you finish paying off one of your debts, take the money you are already used to spending on it and use it to pay off the capital on the next one with the highest interest rate. You will be amazed at how many months this will save you in the long run.

On the topic of savings, when you are done paying off your debt, consider taking the money you were spending on debt and putting it into a savings account. This leads us nicely into step 3 of your journey to achieving financial success.

 

 

STEP 3 - Save money

 

Saving money might be the most obvious step in achieving financial fitness. But what if we told you saving money is about more than just depositing extra money into a savings account. Here are a few ideas for you to think about:

 

• Monitor your spending habits. This will highlight if you are spending money unnecessarily.
• Understand the difference between things you want and things you need and adjust your spending towards the things that you need. Reward yourself occasionally with the things you want. Enjoying your money is important, but not if it leads to your financial detriment.
• Avoid paying for everyday products like groceries with credit. Also avoid paying your bills and credit accounts with credit. All credit attracts additional interest which means in the long run you will be paying more for everything.
• That budget you created in step 2 – scrutinise it a bit and see where you could be cutting down on your expenses. Some of the quickest ways to save on monthly expenses are to downgrade or stop services and subscriptions that you do not use or need. Other ways include consciously using less water and electricity to save on water and electricity bills and buying groceries instead of takeout.

 

STEP 4 - Get credit

 

Having a credit facility or account is not something to be feared. A credit card for example has many advantages if used wisely. Credit can help you to get ahead and achieve your goals sooner. A good example of this is a student loan where you can begin your studies immediately instead of waiting until you have saved enough money, by which time your course would also cost more.

 

Having credit, builds your credit rating which may allow you to access more credit in the future like when you want to purchase a house or car.

Most importantly, having credit available can act as a safety net when things don’t go according to plan. In an emergency where you need to act quickly, access to credit could turn a dire situation into a manageable one.

 

STEP 5 - Achieve your goals

 

Once you have successfully completed steps 1 to 4, you can finally begin achieving the life goals you’ve set for yourself. While the process may not be a quick fix, it is guaranteed to put you on a path to financial success. Not only will you have a better understanding of where your money goes, but also where you can make behaviour changes that will benefit you for a lifetime.

 

From here you will be able to live within your means, manage your debt and strive toward the lifestyle that you desire.

Ready to get started? Find out now what your credit score is. Click here

 

 

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