South Africa’s debt to financial institutions, sits at a horrifying R1, 63 trillion. Back in 2014, we were also reported to be the world’s biggest borrowers by the World Bank. The excuses for spending money you don’t have are innumerable. From, ‘I grew up poor so now I’m going to get everything I want,’ to ‘I needed that pair of designer heels for an important meeting.’ Everyone has ‘legitimate’ reasons for crossing that credit line, but it really doesn’t have to get there. As a young South African you can develop healthy money habits that will mean you always remain on the right side of your finances. Here are five life changing tips that we believe every 20-something should know:

If you don’t have cash, don’t buy it!

We’ve all been there. You walk into a shop, find the best fitting pair of jeans ever, look at the price tag and almost fall over from the figure that you see. Instead of politely putting it back on the hanger, you calculate ways that you can get this item because you ‘won’t survive’ without it. Fast forward 15 minutes and you’re walking out with a smile on your face and the jeans in your hands, because you signed up as for an account card for the store which allowed you to purchase on credit. What they didn’t tell you is that you’ll end up paying more for the jeans in the end, but that doesn’t matter because you’re going to look on trend at the braai on Saturday.

The reality is, opening a store account in South Africa means that you are paying over 20% interest on your purchase. These charges are the maximum that can be placed on credit purchases according to Regulation 42 of the National Credit Act. So rather save money if you feel like you want a new pair of shoes, and then go shopping when you feel that you have enough money. Or take something out on lay-by. This means that you set something aside at the store and pay it off bit by bit each month. Once you’ve paid the full amount of the item, you can take it from the store. There is no interest on this agreement, plus if you change your mind halfway through payment, the store is allowed to only keep 1% of the amount you’ve paid up until then. Always remember that the borrower is slave to the lender, so consider buying on credit carefully. Of course with bigger assets like a car or property, a huge majority cannot afford to pay for these acquisitions straight up. Consult a professional who will guide you accordingly and get something that you’ll be able to comfortably afford repaying.

 

Make sure that you are covered

One of the biggest misconceptions of being young, is that you don’t really need life, dread disease or disability cover. Statistics over the past year have shown that more and more young people have been claiming from their policies for dread diseases, retrenchment and other hiccups that life has presented. There are all kinds of cover and making sure that you are covered for anything that might happen, will really give you peace of mind. Research to find out what the perfect cover for you is and go for it, especially if you are the breadwinner in your family and there are others relying on the income that you provide.

Develop good saving habits

Saving is not easy. You often feel that there are so many other things that you can do with the money and somehow something always creeps up. But if you are adamant about developing good saving habits, you’ll find that it all becomes really easy. If it makes it easier, divide your savings into three sections; short-term savings, mid-term savings and long-term savings. Your short-term savings are those that you use for rainy days. If you accidently have a tyre puncture or need to contribute towards a long distance trip when someone passes away, then this is where the money would come from. The middle-term savings are for when you have a project in mind that you want to accomplish. If you’re thinking of extending the house with an extra room, or installing a new fence and gate around the house this one’s for you. And then long-term savings are for big purchases like property or an education trust for your children. Each savings goal has a different time frame, so make sure that you save effectively for your all of your needs.

Pay off your debt, no matter how small   

It’s really important to pay off your debt before it accumulates and starts to hinder you from making really big purchases in the future. The student loan you took out in University needs to be paid off as soon as you can. Letting a debt accumulate or remain unpaid just makes things worse. Get professional help to manage your debt effectively, and no matter how small it is start making payments that will help get rid of it as soon as you can. The debt culture in South Africa is not a healthy one, with 19 million South Africans having an impaired credit record as stipulated by the National Credit Regulator. Make sure that you don’t fall into that statistic and try to keep your credit record clean.

You are your best financial asset

Investing in yourself is one of the best things that you can do. It’s what the experts call ‘human capital.’ If you were to strip away your job title and everything else that goes with it, what would you be able to offer? Could you start from scratch and rebuild based on all the knowledge and skills that you’ve accumulated? Make sure that while you’re still young, you are finding ways to build your human capital. Through courses, mentorships, engagements and various other avenues. Trust us, in the end when you’re wanting to settle into retirement or start your own business, it’ll be under your own terms.

With these five tips, success is almost imminent. Remember to use your 20’s as the building blocks for a solid foundation. Yes – live, be young and free but most importantly be smart. Because being smart will make sure that you have more flexibility in the future, to do the things that you really want.