As 2025 gets into full swing, it is important to take some time to assess your financial wellbeing and set a plan for a prosperous new year, aimed at achieving financial stability and success.
“There is only one person who is responsible for your finances and that’s you,” says Ester Ochse, product head at FNB Integrated Advice. “At the beginning of each year, sit down and have a good look at your finances to see where you can make some quick tweaks to thrive in the long run. The first step is to take control and look at where you are and where you want to get to.”
Jessica Pillay, a Momentum financial adviser, says starting the year with open and honest money conversations – both with yourself and your family – can set the tone for financial success. Having these conversations may be uncomfortable, but it’s essential for making progress. Avoiding discussions about debt, budgeting and financial shortcomings only leads to further financial uncertainty.
“Understanding your strengths and areas for improvement allows you to create a plan that supports long-term stability and wealth creation,” Pillay says.
Ochse says budgeting is the first step towards figuring out how much money you should spend on the things that are essential to you. “The next step is to examine your financial situation and compare needs with wants.
“Then consider whether there is a way to allocate some of your money towards essential expenses and cut back on non-essential or unnecessary spending.”
In terms of debt, she warns that it is important to access debt for the right reasons. “Using debt to build a balance sheet is a great way to build wealth. Examples of this could be buying your first home, or starting a well-thought-out business that has great potential to thrive.”
However, she warns against lifestyle debt. “Lifestyle debt – overextending yourself through frivolous spending – is a wealth delayer. To avoid this, get a full picture of your debt position and credit score, then work out a plan to pay off expensive unsecured lifestyle debt.”
Farzana Botha, segment manager at Sanlam Risks and Savings, says trying to service your debt as minimally as possible is a common mistake. “You should not be paying just the minimum amounts due on your debt. For example, you want to pay more towards credit cards, which carry higher interest rates. This will help you reduce the time over which you make the repayments and the total interest you pay.”
In terms of savings, Ochse recommends having an emergency fund in place for rainy days. “Make sure that you are protected against the inevitable. We all know that emergencies will happen, be it a bumper bash, burst geyser or unexpected medical bill. The ideal is to have between one and three months’ income available in an interest-bearing savings account, so if there is an emergency, you do not need to rely on debt.”
If you are daunted by the thought of saving up the equivalent of a few months’ salary, Ochse advises you start with small goals – work towards one week then one month, and so on. “Even putting R100 per month into a savings account for emergencies can add up. The important thing is that you start,’’ she says.
Capitalising on loyalty rewards programmes is also a smart move. Ochse says you should research the programmes you belong to so you can identify which behaviours will enable you to increase your points.
“In addition to paying down lifestyle debt or contributing to your long-term wealth creation objectives, loyalty programmes offer an easy way to get money into your bank account for things like groceries, fuel and utility bills,” she adds.
Other money-savvy moves include:
Stacking habits for success
Pillay recommends leveraging the concepts of habit stacking and pairing new financial behaviours with existing routines to make progress more manageable.
- Daily tracking: Review your expenses as part of your daily routine, for example, while having your morning coffee.
- Savings routines: Transfer a set amount to your savings account each time you pay a bill. This incremental change will add up surprisingly quickly.
- Family discussions: Use weekly meals or family catch-ups to discuss budgeting goals or savings plans.
“Small, consistent actions can lead to significant changes over time,” says Pillay, adding that habit stacking makes it easier to build these behaviours into your daily life, ensuring they become second nature.
Getting around the Janu-worry stress
“If you’ve overspent during the festive period and you find yourself in a lot of stress in January, then the next best thing is to do a stocktake of your January fails, financial goals and plans for the year and set a milestone budgeting plan,” says Botha.
“You can review this plan regularly on a weekly or monthly basis to see if the plan is meeting your needs and giving you an opportunity to progress.”
Reduce the tax you pay
Don’t be shy to take advantage of tax deductions. Thomas Berry, head of sales at PSG Wealth, says two “smart” options for South Africans looking to maximise their bonuses are retirement annuities and tax-free savings accounts.
Retirement annuities are a tax-saving powerhouse. Contributing to such an annuity allows you to deduct up to 27.5% of your taxable income annually, capped at R350,000. This reduces your taxable income, putting more money back in your pocket while growing your nest egg tax-free.
Retirement annuities are designed for long-term savings, and access is restricted until you’re 55 or upon early retirement because of permanent disability. When the time comes to withdraw, only a portion is taxed, making it a cost-effective way to secure your future.
Tax-free savings accounts offer the perfect balance of tax efficiency and accessibility. Your funds are accessible anytime, making them a great option for medium- to long-term goals like saving for education or a deposit for a home loan.
Although withdrawals permanently reduce your lifetime contribution limit of R500,000, another unique feature of tax-free savings accounts is the freedom to invest across asset classes, unconstrained by regulation 28, which is issued under the Pension Funds Act and sets limits on how retirement funds can be invested in various assets or asset classes.
Cover your insurance bases
The beginning of the year is also a good time to reassess your insurance coverage, particularly if you have made any large purchases recently.
Marius Kemp, head of personal lines cover at Santam, advises that you review your policy to ensure you are insured for the right amount – what insurers call the “sum insured” or “limit of indemnity”. For example, if you have bought a new tablet and a TV, you will need to adjust the contents of your home insurance cover or specify some items.
“Or maybe the value of your car has depreciated and you want to lower the premium you pay,” he says. “Check whether there are specified items on your policy that you have since sold or no longer use – they could be removed from the policy.”
Kemp says you should guard against being underinsured, however. “This may sound obvious, but the value of the goods insured should equal what it would cost to replace them today, not the original purchase price, except for motor insurance. For example, a leather couch bought 10 years ago would be insured for R6,000 but to replace it might be R20,000 today.”
Insurers usually automatically adjust your sum insured each year at renewal to keep pace with inflation, but you should check the figures to make sure they are updated.
If you’ve enhanced the value of your home by adding solar panels, redoing your kitchen or installing a swimming pool, you need to increase the amount your house is insured for with the replacement value of these additions. Kemp says this will depend on whether the original sum insured was the true replacement amount at the beginning of the policy.
“Your house – its structure – and your belongings must be insured at their replacement value. That is, what it will cost you, at the time of a claim, to rebuild the building or replace all your belongings with similar, new structures or items,” he says.
Your car should be insured for its reasonable market value, which is the retail value of a similar vehicle – what a dealer would sell it for considering its age, make, model, mileage, condition and any extras.
If you’re wondering what your car is worth, take it to a few car dealers and ask what they would offer you. Often, you will find that the dealership with the same brand as your car is likely to offer the best price.
In addition, reassess your driving patterns based on the past year. If your daily driving routines have significantly changed because you’ve started working from home or changed jobs, for example, this may result in you travelling less.
“Most good insurers will offer discount models that reward this reduced risk, so it’s worth checking what is on offer if you are on the road less,” Kemp advises. DM
This story first appeared in our weekly DM168 newspaper, available countrywide for R35.
