It is basic that mortgage holders have a framework set up that will help them through a rainy day if necessary. Owning a house is a long-term financial commitment that requires a lot planning.
Irrespective of whether someone is in an entry-level job starting out their career or an entrepreneur with a very successful company, it is imperative to have strong monetary standards set up to have the capacity to overcome the tough times and keep on thriving notwithstanding when the economy isn’t in a perfect state.
Here’s a few guidelines you can use to obtain financial freedom sooner:
Set up an emergency fund
An emergency fund will ensure that you don’t have to go into more debt to settle the problem. Aim for saving of around R10 000 as an initial start-up emergency fund.
Unexpected life events happen and often cost money, especially if it has to do with your home. While insurance will cover a large number of possible events, it won’t cover everything, so homeowners need to be financially prepared.
Pay off your debt
Make a list of all your outstanding debts, arranging them from small to high. Start slow and pay off your smallest debt first. Always try to pay the debt with the highest interest rate first.
This will motivate you once you see your debt getting smaller one by one. With each debt being paid off you will be able to pay off your larger debts faster because of the increased cash flow you will have.
Secure your expenses
As per Dave Ramsey you should calculate the amount of money you will need to live on for 3 to 6 months, and start saving to protect yourself against life’s big surprises. If you do this you will likely never be in debt again.
This emergency fund will keep you secure if something unexpected goes wrong, for example; getting retrenched. Make sure to keep your money in a easy accessible account that you have immediate access to.
Secure a retirement fund
In an ideal situation, a minimum of around 15% of the household income should be invested for retirement.
Numerous South Africans don’t have enough cash to support themselves when they resign. On the off chance that you have paid off your obligation and have a full emergency account, it is time to shift focus to putting money aside for retirement. The money that was used to pay off your debt can now be used to build a future.
Pay your bond off quicker
Even a small additional monthly payment can make a big difference to fast-tracking your financial freedom as a homeowner. An increase of R500 on a 20-year bond of R1 million at an interest rate of 10.25%, will reduce the term of the loan by almost three years and will save you R221 106.
Over the term of a home advance, a huge number of rand is spent on paying the interest. You can immensely reduce the measure of interest you pay by expanding your bond installment to decrease the term of the loan.
There are a lot of affluent people who lost their wealth because they did not understand the fundamental financial principles. Regardless of earning potential, the same principles can be used and applied to ensure that you have a solid foundation to grow from.
Practicing discipline for a couple of years will set you up for life.