Getting on top of your personal FINANCES

MJ CHARTERED ACCOUNTANT’S MELISSA JACOBS OFFERS TIPS ON HOW TO HELP RECOVER YOUR PERSONAL FINANCES AFTER A TOUGH YEAR

This year will be remembered as the year that sent many people’s personal finances into a tailspin. With retrenchments, short time, reduced salaries and loss of earnings being a common consequence of the Covid-19 impact, taking stock of your finances and planning your recovery should be at the top of your new years’ plans.

Here are our top tips to help with that recovery:

•Be sure you have an accurate record of all your debts and liabilities.

Aim to pay off the most expensive debt or the debts with the smallest balances first. Short term personal loans and credit cards would normally be the most expensive debt.

•Draw up a monthly budget showing your net income (plus that of your partner/ spouse, where appropriate) as well as all your fixed monthly commitments. Budget for discretionary items like entertainment and leisure activities too. Keep a record of your actual expenditure and keep it in line with your budget.

•Re-look all your expenses and cut out any unnecessary fat. Shop the market to ensure you are getting the best deal with items like insurance, medical aid, etc.

•Once you have paid off the short term expensive debt, start a monthly savings account. It’s important that you save a fixed amount as soon as you get paid each month. What’s left is what you have to spend for the month, so the key thing is to save first and spend what’s left, not the other way around.

•Be sure to live within your means. Avoid spending money on things that look fancy or flashy when you cannot afford them. A good policy is always to pay cash – if you don’t have the cash, then it generally means you can’t afford it.

•The ultimate measure of your wealth (or lack thereof) is your net asset value, and this is calculated as the market price of all your assets less the settlement value of all your liabilities. This number is very important, as it’s the number that will need to sustain you and your family when you one day retire. A good idea would be to set yourself a goal for your net asset value and every year measure this value to see if it’s growing in line with your goal.

•If you are a registered tax payer, ensure you engage the services of a competent tax practitioner to legally claim all the allowable deductions on your annual taxes. Any tax refunds would be most useful for those who have had a tough 2020.

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MJ CHARTERED ACCOUNTANTS - Our Offer To You

A Complimentary Tax & Accounting Health Check to ensure all your affairs are up to date and fully compliant. To book your session email Melissa at melissa@mjacc.co.za