By Shelley van der Westhuizen, head of financial well-being strategy & applied research at Alexander Forbes
People often need support to make the most of their money to live better and retire better. The right support at the right time means that better choices are possible because they’re based on a good understanding of options. Choices that relate to big financial decisions often are best made with expert help from a qualified financial adviser. But there are things that each of us can do for ourselves to make the most of our money.
Making the most of your money involves investing some of your valuable time
For example, drawing up a budget for your household means spending time listing your expenses and income instead of doing work around your home, relaxing or spending time with people you care about. However, spending less than you earn each month is one of the most important ways to make the most of your money. You can’t make sure you’re doing it if you don’t know how much you’re spending or earning as a household.
Spending less than you earn can be tough
Sometimes it means not buying something you want or only buying it later when you’ve saved up for it. Sometimes it means saying no to things or people you’d like to say yes to. Spending time in your household setting goals and planning for the future is a good investment but it can be hard to make sacrifices now for things that will take a long time to enjoy.
Keeping your retirement savings invested when changing jobs
Some choices people need to make in their work lives are simpler. For example, when you change jobs, you need to choose what to do with your retirement savings. People often still struggle to make good choices because making a good decision can be tough – especially if it means giving up the opportunity to experience relief from financial stress by having access to extra cash. Having extra cash can seem like a good option, especially in tough times.
Many people find it difficult to imagine their future self and what their needs will be, especially when they’re under financial stress now. Having the right information and support when choosing what to do with their retirement savings helps people to understand the importance of also considering the needs of their future self. Keeping your retirement savings invested is one of the most important things you can do to make sure that you have enough to live on in the future.
Making a choice about money is a type of trade-off. As with many life decisions, selecting one option usually means giving up others. Making the most of your money so you can get what matters to you comes from making more good choices and fewer poor ones. This can mean waiting for things you want, spending time doing things when you’d prefer to do others and being uncomfortable now so you can be more comfortable in future.
These choices don’t come naturally to us. Focusing on what we want and need in the future as well as considering our immediate needs, setting goals and having a plan to reach them are useful tools to help us do what makes the most of our money. Practising a bit of what’s right for us, rather than what’s easy, will help us to learn important money skills. In this way, we gain experience and confidence that will lead to even more good choices.