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How young adults in the Covid-19 era can get their savings back on track

Short-term gratification can lead to long-term pain.
Image: Shutterstock

With fewer job opportunities and higher living costs, young adults today face more than their fair share of financial challenges, often forcing them to put essential life decisions on hold — from buying a first home to starting a family.

But there is a light at the end of the tunnel, and time is on your side. Here are five tips to help you get your finances back on track after the Covid-19 pandemic:

Tip #1. Short-term gratification can lead to long-term pain

Instant gratification is hard to resist. But it’s crucial to balance your wants with your needs, especially during uncertain times like these. Consider putting a budget together to determine how much you are earning and how much you are spending. Part of your budget will determine what essential things you have to pay for, like housing, transport, and school fees. Compare this against your discretionary spending where you could get by without having fast food takeout, the newest smartphone and holidays. Depending on your situation, consider moving to a smaller home or selling a second car. While it may seem painful to you and the family, preventative actions like this could mean you are not forced into making harder decisions later.

Tip #2: Debt free = financial freedom

Because of the lockdowns, many young adults were forced to stay at home and move their socialising online. This allowed them to save on nights out on the town, transport, holidays and gym memberships. The lockdowns showed us that we can save if we are forced to. Now that the lockdowns have been lifted, don’t let the positive changes go to waste. Use your savings to get your finances back on track by paying off debt. You can automate your finances by using an app like 22Seven to track your expenses and set up automatic repayments on all your accounts. As you scale back on other expenses, pay off student loans or credit card debts. All of this extra money can now go straight into your savings.

Tip #3: Pay yourself first — even if it’s just a few rand each month

Once you have your monthly budget and started paying off your debt, make savings and investing your number one priority. But with the current economic crisis and lockdowns, is it good to invest now? I don’t know what the stock market will do, but I do know young adults have time on their side, and what the stock market does in the next six months does not matter. Every single 20-year period in history has shown positive gains in the stock market. So, if you’re 30 years old and investing for the next 30 years, don’t worry about the short-term market fluctuations. Stick to your long-term investment goals and save as much as you can every month.

Tip #4: Lifestyle changes

For most of us, our biggest monthly expense is our house or where we stay. If you have lost your income or realised that you no longer can afford your home, you need to consider where you can save most. If you can no longer afford rent, talk to your landlord or your bank. You may be able to negotiate your rent. And if that does not work, consider moving back in with your parents. It might be the last thing you want to do, but it’s a whole lot better than having debt you can’t repay and a bad credit record.

Tip #5: Financial literacy is key

Even before the lockdown, most young adults struggled with and felt stressed about their personal finances. This is because most do not have a financial plan. Sooner or later in your life, you will have to make crucial decisions about your finances. So you’d better get ready. Get clued up on savings, budgeting, loans, mortgages, and retirement savings and ensure your future financial well-being.

Right now, the world is uncertain, and there’s a lot you can’t control, but you can take charge of how much you know about finances, and you can prepare for better days ahead. Invest time in finding a financial advisor who is the right fit for you and, together, develop a plan. Commit to a budget, make saving a habit, and manage risks and returns. While the pandemic continues to impact the economy and dominate the headlines, you can be on your way to a healthier financial future with these five tips.

Jaco Prinsloo, certified financial advisor at Alexander Forbes.

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ff- and afriforum so quiet about vaccines and covid 19. The afrikan’ter is truly leaderless. They don’t want to estrange the conspiracy minded in their fold by endorsing the measures, but they also don’t want to lose their donation base to the virus by standing against the measures. Utterly spineless and rudderless.

(1) be careful to be blindsided by the size instead of the cost of your payments, ie a credit card’s payment (typically 20% interest) is less than a house bond (typically 10% interest) but it is much more expensive. Pay the most expensive debt first, then the next one.
(2) with your yearly 13’th check, pay tyres and radiator etc and then push the balance into your house bond, this way you build up an emergency fund in your bond. See that your bond is a flexi bond. O by the way a broken wash machine does not qualify for an emergency purchase!
(3) People want to live as well, ie eat out. Do it BUT (there’s always a but) if the evening cost you a R1,000 (say) the next day put a R1,000 into an investment account. You will eat out less which means that you’ll enjoy it more. And soon you can use the growth on that investment to pay you eat out. But still maintain the habit!!
These are steps you can apply without using expensive advisors.

It worked very well for me. But I also have the discipline to stick to the plan.

DISCIPLINE – either you apply it, or you bear the consequences.

Why you paying ‘radiators’ and ‘tyres’ every year? Goed koop is duur koop.

Pay off debt. What a novel piece of advice.

Step 1) Ignore the government’s destructive economic lockdowns and make sure you’re putting you and your family’s finances first. Keep your shops and businesses open at all costs. No-one is coming to save you when you’re made destitute by the government’s lockdowns.

End of comments.

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