Regaining Financial Control

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- Do you spend more than you earn?
- Are outstanding payments piling up or becoming increasingly hard to pay off?
- Do you find yourself paying bills late or barely making deadlines?
- Is your credit card limit fully utilized?
- Do you feel like you’re struggling to keep your head above the water?

Here are a few tips to avoid getting into that situation and to get you out if you’re already there.

How to regain control of your finances:
Consolidate your debt

Your financial situation could get very confusing when several different loan or credit card payments are coming out of your account at different times of the month. It becomes difficult to keep track of: which payments were actually made; which payments are outstanding and if you have sufficient funds to cover them; how much you can afford to spend on entertainment and other everyday needs such as groceries, travel, lunch etc.

You can solve this problem through debt consolidation. This simply entails taking out one loan to pay off many others including hire purchase debt and loans and credit cards from other banks and retailers. This way, you only have to service one loan, track one payment and deal with one bank.
Ask for a Debt Consolidation Loan.

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There are times when mortgage or loan installments and high credit card balances can become burdensome. As soon as you start to feel overwhelmed, you should set up an aggressive plan to automatically reduce your debt. Commit to paying off one loan or your credit card entirely. By commit, we mean that you:

• Sacrifice and pay extra to that loan monthly so you pay it off faster. You should choose either the debt with the highest interest rate as this is the most expensive debt you have, or, the one you can pay off fastest.
• Set up a monthly recurring transfer via Digital Banking to pay off your credit card.
• When that loan is paid off, you would no longer have to make that installment and would therefore have ‘freed up’ funds.

Do not go on a spending spree with those funds. Instead:

• Decide on the next debt you want to pay off
• In addition to your normal installment on this debt, also apply the ‘freed up’ funds from the last loan you paid off.

You will therefore pay off this next debt well before its maturity date. Continue using the funds that become available after paying off each debt in this way and you’re on the road to being debt free.

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Don’t save in your salary account.

You need a basic savings or chequing account so your employer can deposit your salary through the bank. This is your main transaction account to buy lunch, pay bills, buy groceries and party so, ensure you get an ATM debit card and cheque book to easily access your funds. It is highly unlikely that you will meet your savings goals if you try to save in this account. You will probably spend money that you will need some time in the future and then, when that time comes and you don’t have the money set aside, you will find yourself frustrated and financially stressed. So, keep your spending account separate from savings.

Ask for:

• Chequing Accounts for salary processing ;
• ATM Cards;
• Automatic Savings Plan to debit your Salary Account and save in a high interest yielding savings/investment account.

Monitor your accounts consistently:

• Review your bank statements monthly so you keep tabs on how you are spending your money.
• Look for areas where you can cut-back, reduce debt and increase savings.
• Also make sure you have telephone banking and internet banking (where available) so you can check the balance in your accounts between pay days and adjust your level of spending to suit your financial situation.
• Ask for: telephone banking (where available); internet banking (where available); The highest statement frequency on your Salary Account (Eg. Monthly Statements)

Don’t let your credit card debt spiral out of control

Credit cards are wonderful financial tools but they have to be managed. Get into the habit of using your credit card only if you can pay the balance in full each month. If your balance is increasing and you are only making minimum monthly interest payments, you may be losing control. As soon as you reach that point, you should set up an aggressive plan to automatically pay off this debt.

Six steps to automatically paying off your credit card balance:

1. Decide on the amount you want to pay off on your card. Aim for the full balance.
2. Stop spending with your card! Refrain from using your card until the amount owing has been reduced by your target amount.
3. Decide on a date by which you want to pay off your outstanding balance.
4. Calculate number of months to target date.
5. Divide the total outstanding balance by the number of months.
6. Set up a recurring transfer via Digital Banking to pay that amount monthly to your credit card account.
   
   Ask for: recurring transfer via Digital Banking to your credit card account. Remember it’s not how much you earn…it’s how much you spend.

Set up to avoid financial stress.

Financial stress enters our lives when:

• We are struggling to find funds for essential major payments that arise every year.
• We don’t have the funds we need to accomplish cherished goals.
• We lose our jobs or would like to change jobs but are tied because of financial obligations.

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Save for annual expenses

Year after year, many of us find ourselves with the same financial problems. We know we have to pay house or car insurances and other annual expenses, yet we pretend otherwise until the due date arrives. We then use our credit cards or even seek financing to pay for these unavoidable expenses. You should list and calculate the total of these expenses, divide the total by 12 and save for them monthly so you will have the cash available when the time comes.

Save at least 3 month’s salary

In the event of loss of employment, a decision to change jobs, an international financial crisis or any emergency, you still need to pay bills, buy groceries and cover other unavoidable monthly expenses to keep your home running, provide for your children and simply live. Everyone (especially parents, homeowners and renters) should have an account with at least three to six months salary set aside. If you find it difficult to save three month’s salary, you should aim to cover at least three months of expected expenses (loans, rent, bills, etc.)
Ask for:
Automatic Savings Plan from your Salary; Account to high interest yielding savings account or a Loan for an amount equal to three month’s salary

Save for your major goals

People become very frustrated when they make a decision to achieve a major milestone but find that they are unable to do so because of lack of funding. If, for example, you’re planning to buy a car or a home, you probably need to have a down payment to qualify for the loan or mortgage. Decide on your next major life event, call us to find out the financial implications, and set up either an Automatic or Forced Savings Plan immediately so you’ll be prepared.

Look to the future and increase your earning potential

Your current salary may be sufficient to meet your needs now but will it be enough in the future?
For instance:
- Will you have enough money to maintain your standard of living if you buy a home, have kids or buy a new car?
- Will it be enough to allow you to take that dream vacation or ensure that your mother receives the best care available as she grows older?
If you think you need a salary increase then you have to make yourself more professionally attractive to the job market and even to your current employer. This may require taking a short course or pursuing a degree. If so, there is a financial side to this and we encourage you to call us to discuss your options.

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My cash control checklist

• Consolidate your debt for one easy monthly payment.
• Reduce debt one at a time by setting up a recurring transfer via Digital Banking to pay a little extra to that selected debt every month.
• Do not save in your Salary Account; use it for everyday transactions.
• Check your monthly statements and use internet and telephone banking (where available) to monitor your spending every month.
• Set up a fund for annual expenses such as Car and House Insurances etc...
• Set up a 3 month salary cushion to insulate yourself against job loss or job dependency.
• Plan your goals and set up a fund to save for them e.g. home down payment or wedding expenses.
• Set up a recurring transfer via Digital Banking to pay a comfortable amount to your Credit Card every month to keep it under control.
• Seek out degrees, certificates and courses to increase your chances for a promotion and a higher salary.