Unveiling hidden financial wisdom

ROMANA PETERS

Dear AFETT,

I have been feeling a bit stressed lately, especially when it comes to managing my finances. I've worked hard to get where I am in my career, but when it comes to money, I feel a bit lost.

I realise there's so much I don't know about handling money. Can you advise me on how to start taking control of my finances without feeling overwhelmed?

Dear Maria,

I completely understand where you're coming from.

Managing finances can feel like navigating a maze sometimes, especially when you are juggling a demanding career. But don't worry, you're not alone in feeling this way.

Allow me to share some insightful tips on taking control of your finances without the overwhelming feeling.

Amidst the myriad of financial data, there exists a plethora of information often overlooked or concealed within the folds of our financial lives. This raises a pertinent question: Where do we stand?

At the heart of financial literacy and education lies a pivotal concept – financial awareness.

It's not about being encyclopaedic about every nuance of finance, but rather, being cognisant of what we know and what we don't. Ignorance, after all, begets another layer of uncertainty. Yet in acknowledging our knowledge gaps, we uncover the pathways to enlightenment.

Financial literacy transcends the rudiments of budgeting, savings and investing. While these fundamentals are crucial, I aim to shed light on concealed or disregarded financial wisdom, empowering you on your financial journey.

Automatic savings: A paradigm shift

In an event I attended recently, in a room of 52 people aged 29-45, I posed a simple query: How many of you save?

Astonishingly, only half raised their hands. Delving deeper, I discovered that a mere fraction had embraced the concept of automatic savings.

Despite the prevalence of automatic deductions for taxes, loans and other obligations, setting up an automatic savings plan remains a distant aspiration for many.

The prevailing misconception? That significant sums are requisite for recurring deposits.

However, from my research, a mere one in every 22 savers had an automatic savings plan. It's a stark realisation that demands immediate rectification.

There is an urgent need to bridge the gap between intention and action. An automatic savings plan not only streamlines the process of saving but also cultivates a disciplined savings habit.

Moreover, certain financial institutions incentivise such behaviour by offering bonus interest for consistent deposits and savings patterns, providing an additional impetus for adopting this prudent financial practice.

Create an emergency fund

An emergency fund is not akin to a regular savings account. Rather, it serves as a financial cushion against unforeseen circumstances such as medical emergencies, job loss or unexpected repairs.

Establishing this fund necessitates a behavioural shift, gradually accumulating savings to cover three-six months' worth of expenses.

Think of it as your personal insurance policy – a shield against life's uncertainties.

Moreover, an emergency fund can serve as collateral for obtaining additional funding, offering a lifeline during times of immediate financial need.

Build your credit score

Too often, we only consider our credit score when making significant purchases. Yet, this leaves us at a disadvantage, devoid of a credit history.

To remedy this, consider obtaining a secured credit card to forge a positive credit record.

Additionally, by maintaining credit card balances below 50 per cent of the credit limit and setting up recurring payments to avoid missing payment deadlines, individuals can fortify their creditworthiness and pave the way for future financial endeavours.

Moreover, diligent credit management can result in favourable interest rates on credit cards, further enhancing one's financial standing.

Obtain a copy of your credit report

Understanding one's credit score is paramount to navigating personal finance.

Your credit report serves as a testament to your financial stewardship, offering valuable insights into your payment history and creditworthiness.

Regularly monitoring your credit score provides a snapshot of your financial standing, empowering you to detect discrepancies and rectify errors promptly.

While minor fluctuations in your credit score may cause momentary unease, remember your credit score is but a snapshot of your financial journey at a particular moment in time.

Have a personal financial audit

The term "financial audit" may evoke images of corporate rigidity and bureaucratic challenges.

This critical yet often overlooked component of financial literacy entails a thorough assessment of one's financial landscape, encompassing income, expenses, assets, liabilities and overarching financial goals.

From gathering pertinent financial documents to calculating net worth, reviewing debt obligations and evaluating savings and investments, the personal financial audit serves as a compass, guiding individuals towards financial clarity and empowerment.

By systematically assessing your financial health, identifying areas for improvement and devising actionable strategies for financial goals, you embark on a journey of self-discovery and financial empowerment.

Set personal financial KPIs

Monitoring key performance indicators (KPIs) fosters financial awareness and literacy.

These indicators – including net worth, savings rate, debt-to-income ratio and investment return – serve as barometers of financial health, guiding your journey towards financial prosperity.

In embracing financial literacy and education, let us navigate the intricacies of personal finance with clarity and purpose.

For in knowledge lies empowerment and in empowerment lies financial freedom.

Let us embark on this journey of financial enlightenment together, as we unveil the hidden gems of financial wisdom and chart a course towards a brighter financial future.

All the best!

This article was submitted by the Association of Female Executives of TT (AFETT).

AFETT is a non-profit organisation formed in 2002 with the goal of bringing together professional women and engaging in networking opportunities, training and business development.

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