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This year has undoubtedly been challenging for South Africans, with the high cost of living and rising interest rates weighing heavily on households. However, as difficult as it was, 2024 has also taught us some valuable lessons. The new two-pot retirement system introduced this year has also taught us a great deal about how we manage our finances. As we look back, here are five key takeaways from the year that will help you be a smarter budgeter, saver, and investor in 2025.
Lesson one: save for car expenses, home repairs and renovations
Many investors withdrawing money from their retirement savings, now allowed under the new two-pot retirement system, said they needed the funds for car and home expenses, among other things. Planned or unplanned car maintenance and home repairs and renovations drain savings and leave too many South Africans with high debts that they struggle to repay. It’s a vicious circle that will rob you and future generations of wealth.
For emergency expenses, the traditional advice is to save 3 to 6 months living expenses in an emergency fund, which also has to replace income lost to retrenchment, for example. You can use the 1Life Insurance emergency fund calculator to give you an indication of the amount you may need to put aside. For other expenses, save the amount needed, such as R30 000 for a new kitchen, and resist the temptation to use credit to fund these projects.
Lesson two: avoid short-term debt at all costs
It’s a relief that interest rates have come down, but don’t forget how high they were and how much more you were paying in interest on short-term debts such as credit cards and personal loans. These debts became increasingly expensive as interest rates went up, and many could not afford the repayments. In 2024, South Africans were spending nearly two-thirds of their income on servicing their debts - which is also why some investors withdrew funds from their retirement savings.
Work towards low or no short-term debt and your 2025 will be less stressful! You will also have cash to save, invest and spend! Start today by working out how much short-term debt you have and coming up with a plan to repay it. If your debt has become unmanageable, negotiate lower repayments with your creditors or consider debt counselling. You can find more advice in this blog.
Top tip: Take the free, online 30-minute Ditching Debt course from Truth About Money, a 1Life Insurance initiative, and you’ll learn more about paying off your debt and living debt free.
Lesson three: stay on top of what you owe SARS
Heard about the two-pot withdrawal where the investor was expecting R20 000 but got only R2 000 after SARS deducted outstanding amounts? Don’t let this happen to you! SARS has access to personal financial records that show what you earn and what you owe in personal tax. Pay what you owe, when you owe, using all allowable deductions, and your tax will be minimised and paid in good time! Don’t pay and you will be charged penalties and interest and spend many hours stressing about your tax bills!
The tax year runs from 1 March to 28 February, with tax filing season from around June to October each year. Speak to a financial adviser or tax practitioner if you have any tax concerns or need help with your tax returns.
Lesson four: prioritise cover for you and your family
Your life cover and funeral cover policies ensure your family has money for a funeral service and funds to cover expenses when you pass. Without life cover, your family could face financial distress and have to reduce their standard of living, sometimes even sell assets such as a home to get by. An insurance pay-out can change your family’s lives for the better!
If you are struggling to pay your premiums, talk to a financial adviser or a skilled 1Life Insurance consultant about how you can make your premiums more affordable. This blog also has a lot of really great advice.
Top tip: If you only have funeral cover and would like to add life insurance to your portfolio, ask your financial adviser or one of our consultants for a quote. It might be more affordable than you think!
Lesson five: work with a financial adviser to make good financial decisions for you and your family
A financial adviser can provide independent, objective advice on your financial situation and help you draw up and stick to your budget and financial plans. They can also offer good advice when you are making financial decisions, such as whether or not to withdraw funds from retirement savings.
South Africans withdrew over R35 billion from their retirement savings in just 12 weeks. Although this provided much needed financial relief to many families, it does mean they will have less for retirement. Financial advisers can offer advice on how to find additional funds without accessing retirement savings, and, if need be, how to make up for withdrawn savings to ensure you can still reach financial independence later in life.
Financial advisers will help you make sense of a financial world that is full of jargon, terms and conditions, fees, costs, products and criminals wanting your money! An experienced financial adviser will help you tackle these challenges and make informed decisions that grow your family’s generational wealth! Think of them as your 2025 money doctor – ready to offer advice and help you change any bad financial habits, while ensuring your family has the cover they need and investments and retirement savings that are appropriate for your goals.
Here’s to a successful, financially-savvy 2025
2024 was a financial challenge! But, you made it through and have learnt some fantastic money lessons that you can use to make 2025 a little easier and more financially rewarding! These top 5 money lessons will help you make the new year your best money year yet!