2011 financial accountabilityFor most of us there was a time when we didn’t have many financial responsibilities. A time when we spent money on ourselves as and when we chose. However, as we get older, the number of dependents and responsibilities we have increases. We are no longer just accountable to ourselves, but to families and other dependents too, emotionally, practically and financially.

Financial accountability is defined as responsibility for the way money is used and managed. In being financially accountable, there are certain considerations:

  • Are you being responsible financially? Are you using the tools and resources you have available to help you?
  • Are you managing your finances with the future in mind? The financial decisions you make today will affect you tomorrow and into your old age.
  • Are you managing your finances with your dependents in mind? Your financial decisions, good and bad, will affect both you and them.
  • Are you correctly distinguishing between needs and wants? Today’s “nice-to-have’s” won’t pay tomorrow’s bills.

Luke 16:10 says “Whoever is faithful with very little will also be faithful with much, and whoever is dishonest with very little will also be dishonest with much”. Be responsible and a good steward of your finances. Develop these habits early on and as you grow older – and your family’s need and your responsibilities increase, and your earnings potential increases – it will be that much easier to manage your money.

debtOver the past few weeks we have spoken much about debt, its dangers and what one can do to manage it and get out of it.

As a starting point we should ask ourselves, “How did I get into this situation of financial distress?” While a relatively low income may play a role, the fact is that it is often the luxuries we allow ourselves - and the credit we use to fund this - that results in debt.

We need to look at ourselves and check our behaviour in order to avoid financial difficulty as best as we can. Consider and answer the following questions:

  • How do I manage my money? Do I have a budget I stick to, or do I spend as and when I want?
  • How do I decide when to make purchases? Do I buy on impulse or only after careful thought and planning?
  • How did I get into debt? Was it impatience to purchase something I could have saved and paid cash for?
  • What does my financial future look like? Do I have a plan to ensure it’s the future I want?

Proverbs 25:28 says “A man without self-control is like a city broken into and left without walls.”

It is important to answer these questions and make changes to your financial behaviour where necessary. It is even better to have a structured plan as to how you will manage your income and expenses and pay off your debt. However, if you lack discipline and self-control, you risk going back to your old ways. If this is the case, ask someone you trust to help you stay on track. Exercise discipline or else you risk paying the ultimate price and living the life of a debtor.

Lesetja Madiba is a Financial Wellness Consultant at Citadel.

We have been talking about debt recently; specifically about its dangers and how to get out of it. One question that most certainly comes to mind is this: “Do I pay off my debt or do I save instead?” This is a very valid question and it is best answered by maths.

The reality is that for as long as you are making debt repayments you are enriching your creditors and therefore it is almost certainly better to pay off your debt first. Let us consider the following:

  • pay backYou should always try to save some of your income for emergencies, as unplanned expenses can put strain on our finances and be very expensive.
  • If you are paying more in interest than you could earn in interest then it is better to pay off your debt first. Once your debt is paid off, or it is at a manageable amount, then you can increase the amount of money you are saving and start investing. By manageable I mean that your debt-to-income ratio is less than 50%
  • Prioritise paying off the debt with the highest interest rate first. It is often short term debt that comes with very high interest rates and it is therefore best that you pay off that debt as soon as possible
  • Beware of early payment penalties. Some debt comes with penalties should you pay them off early, in which case you need to stick to the payment plan. Make sure you know the terms and conditions of your debt.

Proverbs 27:23 says “Know well the condition of your flocks and pay attention to your herds”. You need to be well aware of your financial situation and track your money so that you can make wise and informed decisions. Rather than carry the burden of debt, pay it off and stop enriching your creditors.

Lesetja Madiba is a Financial Wellness Consultant at Citadel.

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Finance on Friday

Personal Financial Coaching with Lesetja Madiba

IMG 3437Lesetja Madiba is a Financial Wellness Consultant and has a B.Comm Statistics.
He discusses Personal Finances live on a Friday during Changing Gear at 17h00.
Podcasts of these talks are also available.
Click HERE  for Lesetja's Profile and contact details.
Click HERE to read Lesetja's latest Financial Advice Blog.

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