Behavioural theory shows that we humans don’t always make the most rational choices that serve us well in future. In uncertain times, we may also take more risks or make hasty decisions. Stop, take a moment and look at these five behaviours and how you rate. It can have a lasting positive impact to strengthen your financial health in any circumstance. Here’s how.
As a nation, South Africans typically save less than many other countries, we have high levels of debt and many of us are simply not sufficiently prepared for retirement. There may be many causes of this, and poor financial choices and behaviours are contributing to this situation.
Discovery Bank’s research into the reasons why people are typically not able to meet their financial obligations shows these behaviours include spending more than we earn, not saving regularly, not having proper insurance in place for adverse events, not paying off property and not investing for the long term.
Dinesh Govender, Discovery Vitality Chief Executive, explains that the risks of our financial behaviours and not changing them are significant. “Over time, these behaviours result in unaffordable levels of debt, being exposed to unexpected expenses or loss of income, and having insufficient income in retirement. These behaviours leave individuals vulnerable and unable to meet all their financial obligations, and they are far less financially resilient.”
Why we should focus today on becoming financially healthy in future
Financial health seems to be far less about how much you earn, and more about what you do with your money daily, monthly and yearly. Lower-earning individuals who engage across the five controllable financial behaviours are significantly better off in terms of their financial health.
In the current situation, it could seem impossible to change or that it will even make a difference. Govender explains, “Remember, earning a high income does not necessarily equate to being financially resilient or healthy, or even financially free. Whether we are high earners or average earners, financial health is determined by our behaviour and how we manage our money on a daily basis. Being aware of how our actions around money can impact our financial future, helps protect us against serious financial pitfalls down the line. Now, for example, putting some money aside and making sure you have adequate protection products in place are important.”
Discovery Bank’s research highlights that people who save at the start of the month, and use a budget on a regular basis, generally achieve better financial outcomes.
“People who are saving at the start of every month, tend to have larger emergency savings balances to cope with the financial challenges of unforeseen life events, than individuals who save what is left over at the end of every month. Similarly, people who are in the habit of budgeting tend to have more money left; are more in control of their finances and have a better understanding of financial services and products.”
All of this boils down to three things: have some form of financial protection, live on a budget to manage your spending and debt, and save regularly.
But how do we change? The challenge lies in understanding how our financial behaviour today can impact our financial health over time. This was Discovery Bank’s approach with Vitality Money – the behaviour change programme that helps you understand your financial health. Vitality Money combines financial education tools, personal goals and rewards to help encourage people to manage their money even better.
Vitality Money developed the Vitality Money Calculator, which gives a financial health score based on the key financial behaviours that help improve financial health and resilience over time. This score is called the Vitality Money status and is critical in helping you understand your financial wellbeing and take the necessary steps to improve your financial health over the long term.
The Vitality Money Calculator is for information only and does not constitute financial advice. Please consult your financial adviser before making any financial decisions.
Check how healthy your financial behaviour is with the Vitality Money status calculator. It takes a few minutes of your time to learn about your finances across the five behaviours that determine your financial health. Know how to change it and take control of your finances today – Discovery Bank can show you how.
While everyone’s circumstances are different, there is no doubt about the relief a financial safety net brings. Try to make financial choices that will not only help you stay afloat, but also ensure you have something set aside for when you need it most.
Spending and saving tell a lot about your financial health. Even in uncertain times, you have a natural preference. Being financially healthier starts with understanding what you do. Can you spot your money-management style?
Retailers, shopping malls and most services are open for business. With COVID-19 around, we all have to be more mindful. And, at least for some time ahead, it will change the way we interact and shop. Fortunately, Discovery Bank makes contactless banking and payments easy for our clients.