Stick to your long-term financial goals

Times are tough, but it’s imperative that you don’t give up on your financial future, writes Itumeleng Monale, the chief operating officer at the Johannesburg Stock Exchange.

NATIONAL Savings Month comes at a time when the financial pinch is felt by everyone – likely more than ever before in our lifetimes. The prices of fuel and food are soaring due to global inflation caused by Covid-19 economic stimulus packages, constrained global supply chains and the eruption of the Ukraine-Russia war. According to the South African Reserve Bank (SARB) forecast, fuel price inflation will be up 31.2% by the end of this year and food price inflation will climb to 6.6%.

In response, in a bid to tame inflation, the SARB is expected to continue hiking interest rates, raising the cost of debt such as credit cards and home loans. This double blow is putting a strain on consumers.

High inflation does not only result in a rising cost of living, but it also eats into the buying power of consumers. The question then arises: how do consumers manage their money to achieve financial independence in the face of food price increases, whereby the prices of basic food items like bread, milk, flour, cooking oil, meat, mealie meal, and sugar keep on going up?

DON’T GIVE UP

The rising cost of living has the potential of throwing personal financial plans for 2022 out of the window. During these tough economic times, it is important to remember the financial goals set at the start of this year. Given the changed situation, it may be necessary to make some adjustments but it is not the time to completely give up.

As always, consumers must get financial advice that addresses their needs in areas such as estate planning, tax planning, investment planning, retirement planning, life insurance, and short-term insurance.

Executed well, financial planning could lead to financial independence. Also, at times such as this, it is very important to review one’s needs and goals in order of priority. Balancing out savings and buffering yourself against a surprise event that could cripple you financially, is still critically important.

The Johannesburg Stock Exchange (JSE) has various financial planning initiatives such as the #JSESheInvests scheduled for 13 August, which is aimed at enhancing money management skills for women and the JSE

Investment Challenge, a youth development programme that teaches high school learners and higher education students the fundamentals of saving and investing.

Also, the JSE has a Virtual Trading Game, which is a virtual trading platform that simulates a real trading environment. It provides the public with a risk-free opportunity to practice trading shares, and presents an ideal learning opportunity.

The JSE regularly hosts the JSE Power Hours which are a series of free events open to the public to educate people about everything related to investing and trading.

STRIVE FOR FINANCIAL INDEPENDENCE

Writing for Forbes magazine, Erik Carter describes financial independence as a “state of being in which you don’t have to work to pay your living expenses. You may decide to retire, or you may choose to work because you want to, not because you have to”.

Is that not that a position we would all like to be in? Also, you do not want to get to the end of your working life, after years of toiling, only to find that you do not have enough to cover all your living expenses and then become a financial strain on your family.

Moroka Modiba, an author and a financial adviser, says in his book, Think Yourself Rich: A Step-by-step Guide to Financial Independence, that his grandfather taught him that the most critical lesson in the process of attaining financial freedom is the importance of planning and then following up your plans with actions.

“So many people have dreams, but they do not want to take the time to design a proper plan to achieve them. And if they do manage to design those plans in most cases, they end up lying somewhere in a drawer or on the table, gathering dust,” he wrote.

When times are difficult, we also tend to desire shortterm reprieve and want to spoil ourselves or “live for the moment” even more. It is so important to remember that spoiling yourself excessively now may be robbing your future self of a more comfortable living.

Modiba’s grandfather, who was as wise as an owl when it came to planning and managing finances, although he did not have any formal training, says that achieving financial independence is not a once-off event – the road to financial freedom requires constant assessing and nurturing.

As you strive on your journey to financial independence, you should be regularly assessing your financial situation, committing to living within your means, tracking your spending, and most importantly, getting rid of your debt.

However, one of the major impediments to financial planning and staying the course is that many people lack financial literacy, making the journey arduous and complicated. We at the JSE are committed to doing more in this regard, to help our citizens be able to make better personal financial choices through more financial literacy initiatives and information.

It is generally expected that the inflationary pressure will ease in the next 18 months.

In the meantime, we encourage consumers to find ways of first cutting unnecessary spending, avoiding taking out more debt to settle current debt, and ensuring that they stick to their budgets. Delay dipping into the savings and investment account for as long as possible and make a mental commitment to stick to your longterm financial goals.