How to improve your finances in 2018

The start of a New Year often brings with it a renewed sense of purpose, which is why many people promise to improve themselves through resolutions. Getting to the gym more often is usually high on the list. A commitment to becoming financially fitter, so to speak, hardly features, possibly because this goal may seem completely out of reach. As with anything in life, if you are willing to put in the work, with a little bit of patience and a few crucial steps, you can improve your finances in 2018.
Step 1: Take a closer look at what you value

Investing may seem like work because we can’t connect the dots between what we value and the effort of saving and making our money work for us. Recognising your own value system will make you more conscious and deliberate about your finances. To stay committed to improving your finances, consider the question, what do you truly value? Perhaps it is taking care of family, being secure, having a home or providing our children with good education. You may have other priorities that require more money than you may have in the future, or more money than you earn monthly. There are not many people who can buy a home or educate their kids with just their salary, and the alternative, debt, can leave you in a precarious financial position. Investing can help.
Step 2: Adopt a savings mentality

Your future financial well-being depends on your current saving and spending behaviour. While it may be really tough to make space in an already-stretched budget, taking small steps to develop a saving habit, and a lifestyle of saving, will make a big difference to your future.
One way to get started is with a spending detox. The spending detox is about getting control back by reining in this unnecessary spending and breaking the habit of swiping your card willy-nilly. The good news is we are not talking cold turkey here; rather a gradual change in attitude to the way you spend.
As you go through this detox, start thinking about your savings goals, how long you have to reach them and how much risk you are willing to take on to help you earn investment returns.
Step 3: Start saving early, and account for inflation

You can substantially improve your financial situation if you start saving sooner rather than later and you will be a step closer to being financially independent. A little really can go a long way. Small sacrifices today can make a big difference over the long term.
Sometimes referred to as the eighth wonder of the world, compounding makes your money work for you by earning returns today on the returns you earned yesterday.
If you start early and save consistently over long periods, less of your total amount saved will be from your contributions and more from growth.  Your early contributions are more important than your later ones, as your money has that much longer to grow.
However, time also erodes the value of your money and you’re able to buy less with the same amount of rands. This is called inflation. To counter inflation you need to earn investment returns. For example, if the rate of inflation is 6% per year, your investments have to grow by more than 6% each year before you achieve any real return. If the growth in an investment exceeds inflation then it creates more buying power.
Step 5: Surround yourself with financial experts

If you are uncertain how to get started, it may be best to speak to a financial adviser. An adviser will ensure that a disciplined savings and investment process is implemented and maintained, thus eliminating any tendency to procrastinate and allowing you to gain valuable time in the market.
Consulting with a financial adviser is much like seeing a medical professional. Perhaps you think you don’t need the advice of a doctor, and while this may be ok in the short term, the decision to not see a medical professional could severely impact your prognosis further down the line. However, as with doctors and other medical professionals, not all financial advisers are equal.
The key is to look for independent financial advisers (IFA) who are not tied to any products or providers. IFAs can make a significant difference to your financial success as they help you make decisions that you can trust, and are right for your circumstances.
By Thandi Ngwane, head of strategic markets at Allan Gray