Financial planning is all about making provisions for expected and unexpected events into the future. The nearest expected event on our calendar is the festive season which is just around the corner.
If you haven’t been saving for this costly event during the year then you have 4 pay cheques to go to create a nest egg to help you through.
Savings needs to be easily available and safe from the risk of losing any capital. Certain investments such as shares, property and bonds need more time and therefore should not be considered.
Here are 3 ideal places to stash your cash:
Access bond: My favourite for the short term as the money is easily available and effectively earns the rate of interest that you pay on the bond. You should save as much as possible here allowing you easy access to your extra cash over the festive season. You can access it at any time as and when you need money over the holidays and there is no risk at all.
Credit Card: Now is the time to make a move and pay off the credit card bringing it into a positive balance. You will do better with the extra money in the access bond as the interest earned on credit balances on the card are lower (around 4%). The big advantage is that when you get to the festive season you won’t have a noose around you neck charging you an interest of 24%.
Money market account: This investment is normally better than the different savings account on offer by the banks. It generally offers higher interest and is more accessible which is what we are aiming for by December.
You should open up a money market account with your bank and then manage it next to your current account on your internet banking proﬁle. For the next 4 pay days, when you get you salary, keep as much of your money in the money market account during the month and as little as possible in your current account. Transfer from the money market account the current account as and when you need to. Effectively earning some interest instead of nothing in a current account.
You can take charge of your ﬁnancial needs by planning for them. If you saved even a little over the next few months, your festive season will be that much better than having nothing at all and having to make the fatal mistake of borrowing to get through.
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Read more from Paul Roelofse at www.investforlife.co.za