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on for credit, this will definitely count against you. Make sure you have the funds available in your account before making out a cheque. Don`t forget about the un-cashed cheques still needing to be processed through your account. 4. Balance your cheque book This may seem like an old-fashioned thing to be doing, but there is a good reason that all businesses do a bank reconciliation every month, some even doing this daily. Problems can be noted and corrected early on, and each charge is verified and allocated. This process will force you to look at your statement more carefully. 5. Plan your spending Most people don`t know what they spend their money on. If this is the case, then they are not able to prepare a budget of what to spend money on. So do yourself this favour. For two months, keep an accurate record of everything you spend your money on, down to the nearest ten rand. Categorise the spending into: accommodation/house, groceries, schooling/kids, motoring, entertainment; recurring debit orders etc. Two things will become evident from the above exercise. Firstly, you will be more than a little surprised at how much you are spending that is not discretionary. In other words, how much of your spending is committed and comes off your account by debit order. Secondly, you will be even more surprised at how small bits of expenditure amounts to a large total expenditure. Now that you know how much money you spend, make a list of how much money you want to spend in each category. Be realistic when trying to trim expenditure in each category. Now look at your total budgeted expenditure, and look at how much is left to spend on the fun stuff, if any. T he best part of creating and sticking to a plan is that, once you`ve taken into account all the bills and regular expenses plus some savings (see step 8), you don`t have to feel guilty about spending what is left over. 6. Handle your banking Be aware of the banking fees you are paying. For instance, you may be paying up to R8 to withdraw money from another bank`s ATM. Instead, try to withdraw from your own banks ATM. After all, if you only draw R50 and you are charged R8, that`s 16% - ouch! Work out what your bank charges are costing you, and enquire from your bank if there is a consolidated fee option, that allows you to, say, write up to 15 cheques, make up to 5 withdrawals and deposits, and get two bank statements included in the charge. Remember, your bank is comfortable not giving you this sage advice, as they maximise their banking charges. A little attention to detail can save you quite a lot of money. 7. Pay off debt Its easy to fall into debt, and about ten times more difficult to get out of it. Debt is simply the excess of expenditure over income. You know how much you earn, but most of us don`t know how much we spend. This emphasises the need to do step 5 - planning your spending - meticulously. It helps to have a goal date by which to become debt free. Set that date, and develop a plan to reduce your debt levels. Firstly, make a list of all your debts. Then take the smallest debt, and allocate R400 to repay this debt. When this smallest debt is repaid, take that same R400, lump it with the repayment amount that was servicing that debt, and put it towards repaying the second smallest debt. Soon you will have worked your way through your smaller debts, and can start work on the bigger debts. You will be surprised how quickly the benefits will snowball, and soon you can live a better, less stressed, debt free life. 8. Save Its probably easier to save than to pay off debt. How do you save money Do it the same way you spend most of your money. You`re good at doing that right Decide how much you`re going to save monthly, and have this money transferred out of your cheque account into your savings account on pay day. After several months, this will become addictive. You will notice the balance building, and will be earnining positive cumulative interest on the balance. The benefit of saving is enormous. You will be comforted by the fact that any unforeseen expenses can be borne out of savings instead of being financed by additional debt. 9. Check your credit report Your credit record is an integral part of your financial life. A good credit record can make all the difference when applying for that higher paying job, or in negotiating better interest terms on your bond. Ensure that you check your credit record every 3 - 6 months to ensure that nothing negative has been placed on it, and that no-one is committing identity fraud by spending under your identity. Your credit record from both TransUnion ITC and Experian is available on Credit Health in the form of the Credit Health Report . Now that you know how to handle your money like a pro - go for it! The cumulative benefits on your financial stability and credibility will be enormous. QUICK TIP Your Credit Health Report is your financial reputation. Make sure it only says good things about you. This is the first step to building wealth! QUICK TOOL Assistance Credit IQ Saving with an access bond By Iona Minton Tapping into your home equity to pay university fees, consolidate credit card debt or even to buy a new car is becoming commonplace amongst homeowners. While there is no doubt that this is a cost efficient way to finance major purchases it may not be a good idea in the long-term. Regular withdrawals from your home loan account extends the duration of the bond repayments, which means that you're paying interest for longer. However, smart use of the equity in your home can save or even make you money if you do it carefully. Getting the most leverage out of your home equity requires discipline, knowledge and a financial plan. Here are some tips to help you maximise your money saving and growing opportunities. Tip 1: Increase your insurance excess Raising the excess amount on motor and homeowners insurance policies can mean big savings on insurance premiums. If you increase the excess payable on a homeowners policy from R500 to R1000, you could cut your monthly premium by as much as 25 percent. However, many people don't do this because they fear they may not have the necessary cash available in the event that they need to make a claim. With relatively low-interest cash readily available through a home equity line of credit you'll have the security and confidence you need to raise your deductibles and reap the savings! Yes, you will have to pay interest if you need to access the money in the short-term, but over time, provided that you are a cautious driver and home owner, the savings on the premiums will offset the interest charges should you need to access the money. To benefit even more, take the 25 percent you save on the insurance premium and pay it into your home bond; this will give you the added benefit of reducing the amount of capital you owe. Tip 2: Save on a car loan If you are in the market to purchase a new car you could save as much as four percent on interest charges if you 'borrow' the money from the equity in your home. You will almost always get a lower interest rate on a home loan than if you were to take out a car loan. This is because a car is a depreciating asset so the bank carries more risk if you default on the repayments. If you got your home loan at 11 percent, but the bank offers a rate of 15 percent for your car loan, rather take the money from your bond. Let's look at an example: A R150 000 car financed over four years at 15 percent will cost you R4123 per month. If you take the money from your access bond at 11 percent, it will cost you R3841 per month. This is a saving of R282 per month or R13 536 over the period of the loan. The only way this will work is if you pay the full car instalment into your bond each month but don't be tempted to pay it over the life of the loan as it will cost a small fortune in interest charges. Assistance Credit IQ Investor lessons from cricket By Nic Andrew The relatively pedestrian pace of the test cricket games currently being played allows plenty of time for contemplation and it struck me how many similarities there are between test cricket and investing. Winning test cricket matches is often about not making mistakes at crucial times whether it be a reckless stroke or a dropped catch. Similarly, recognising how to avoid the common mishaps is often the most vital aspect of a successful investment strategy. So what are some of the more common mistakes

• No strategy. Each team needs a clear strategy on how they will approach the match. The Australians are masters of this as they target key opposition players, applying enormous pressure at crucial times (ask Cullinan and Flintoff).
• Every investor should develop a strategy that acts as a framework for decision-making this should take into account factors such as ones investment objectives, time horizon, ability and willingness to accept risk, the level of ones investable assets, planned future contributions and tax status.
• Not effectively implementing strategy. One of the most frustrating things for a captain is when a clear strategy is set (such as bowling in the channel outside off-stump) and the bowler does not stick to it and strays down leg. An investment strategy is useless if not implemented with discipline and reviewed regularly to ensure it remains relevant.
• Lack of patience. South Africas talented openers seem to lack patience and foolishly lose their wickets flashing outside off-stump in the early overs. Many investors set an investment strategy then lose patience and change tack at exactly the wrong moment as soon as things do not go as planned. Investing is like test cricket: as opposed to speculating which is more aligned to the twenty-twenty format, it requires patience.
• Unrealistic expectations. Despite all the Barmy Army chanting and tabloid predictions, Australia was always too good for England. It is imperative that investors reasonably anchor their expectations. Particularly after strong market performance, investors get greedy and want to get rich quickly. Over the long-term investing in risky assets (such as equity) should outperform inflation by about seven percent per annum. Long-term expectations above this are unrealistic and likely to remain unfulfilled.
• Not understanding your true tolerance for risk. Everyone loves Gibbs attacking style of hitting over the top, until he holes out in the deep. Many investors are unable to accurately predict their appetite for risk. Understanding how one will react emotionally to large short-term fluctuations and capital loss should be done upfront to avoid inappropriate knee-jerk reactions at times of stress.
• Overconfidence. The South Africans were humbled in the first test after thumping the Indians in the one-day series. Human beings are often too confident in their own ability this leads to certain destructive behaviour, such as trading too frequently or being overconfident in ones ability to predict uncertain events. Confidence tends to increases dramatically after a period of good fortune.
• Paying too much in expenses. At the end of the series, every run counts, whether it is a McGrath snick through the slips or a classic Ponting cover-drive. When investing, every percentage of returns counts an element of this is ensuring one does not pay too much in fees and expenses, and being sure to measure results net of fees and taxes.
• Lack of diversification. In any test line-up, diversification of skills is important to win. For ages, the South African team has lacked a quality spinner who can wrap up an innings. The antidote to risk is to invest in a broadly diversified portfolio incorporating different asset classes and investment styles.
• Chasing performance. It is natural to wish for continual excellence in performance. Unfortunately, even the best players have slumps and it is best to stick with class players as they will often play their way out of it. Investors, who chase performance, invariably end up buying high and selling low a sure recipe for disaster.

The classic buy-high/sell-low investor profile is someone who has a long-term investment strategy but does not have the tenacity to stick with it or those who follow fads or the latest hot tips. If our cricket players can avoid these mistakes, their chance of success will increase dramatically, and we may move up the world rankings. As an investor, hopefully you too can avoid these mistakes and enjoy a prosperous future. Good luck! Just like winning a crucial toss on a turning pitch, a healthy dose of good fortune is always welcome. Assistance Credit IQ The 10 rules of financial management By Credit Health Have realistic expectations Nothing that you can do today is going to change your finances today, but each financial decision you make can make a small difference to your finances. Enough of the correct small decisions, and you will make a big difference to your financial decision. It is important to have a clear picture of what you want in your finances, and then to stick to these goals. Similar to a successful weight loss program, you need to start out with your goals, and then to take action every day in the direction of those goals. Each action you take will either take you towards, or away from, your goals. Make sure that you take the correct action to take you in the direction of your goals. The financial advice you get on Credit Health will lead you to a better financial life, if you follow the advice. Wed like to be there for you, as your personal coach, always guiding you in the right direction. As you know, a coach is only as successful and the student, and we hope that you will approach this advice with enthusiasm and best intent. Live within your means Actually, you need to live below your means. The most important way to generate wealth is to live below your means. It stands to reason: if youre spending all the money you make, how are you going to make your money for you But most people dont understand this. The average South African spends 73.8% of his income on debt repayments. Thats over 73% on just servicing the debt. After that, he needs to spend money on consumables like groceries, insurance, petrol, security etc. Guess what is left at the end of the month. You guessed it nothing! By living within your means we mean this: you need to curb your expenditure to less than 80% of your income. That way, you can use the other 20% + to pay off debt fast, and save invest for your wealth. Stay out of credit card debt The main problems with credit card debt is as follows:

• If you can afford something, buy it using cash. If you have to use your credit card, youre spending money you dont have. This is called debt. As we know, debt inhibits your ability to build wealth.
• The interest rates on credit cards are very high, usually 5 12% above the prime rate of interest. This makes it very expensive.
• Many people who have a high outstanding balance on their credit card simply feel that it is hopeless trying to pay it off, so they dont try too hard, sending the outstanding balance even higher.

Once you get into credit card debt you fall further and further behind because, in addition to paying your current expenditure, youre paying for the previous expenditure you owe on your credit card. We recommend that you:

• Reduce your outstanding balance of your credit card by paying off more than your minimum instalment, and more than you purchase monthly on your credit card. Any additional money that you can pay to reduce your credit card outstanding balance is money well spent
• Once you reduce your outstanding balance, call your credit card company and have them reduce your credit limit, forcing you not to overspend on your credit card in the future
• Dont lose site of bigger picture. Dont become discouraged. Always remember that, with willpower and concerted effort, you can get your outstanding balance on your credit card down, leading to peace of mind in the medium to longer term.

Maintain a spotless credit record Your credit record contains all the information that your creditors are maintaining on the way that you make payment of the financial obligations you enter into. As such, it is your financial reputation. It is also a strong indicator of your financial habits. If your credit record contains lots of negative information, it tells us that you dont have very good financial habits. It is a symptom of a larger behavioural problem. Make sure that you maintain a spotless credit record, which will lead to lower interest rates, and creditors wanting to do business with you. Its worth the effort. Rationalise your spending You may really want that new car or cell phone, or latest gadget. It tells others that youve arrived, doesnt it You will the envy of all your friends. This is the high consumerism market we live in, and we are the apple of every good marketers eye. The truth is that you dont have to have the latest car, cellphone or iPod. You can do without it, at least until you can afford to pay for it in cash, or to buy it out of savings you have created by spending your money wisely, and saving and investing the balance. Understanding opportunity costs Opportunity cost is defined as the cost of pursuing one opportunity over another. For example, if you are considering buying a bicycle which costs R1000, the opportunity cost would be defined as the lost opportunity of doing something else with this money, like investing it in a 32-day notice savings account. If you buy the bicycle, then in a years time it may be worth R250. If, however, you had taken this money and invested it in a savings account at 7%, it would be worth R1070 after 1 year. The difference between the first option and the second option is R820 (R1070 less R250) the opportunity cost of not buying the bicycle. Understanding the time value of money This is the most basic law of money. The time value of money law states that a rand today is worth more that a rand in the future. Lets give you an example. Suppose you invest R1000 in a savings account today, at a 7% interest rate. In a years time, your investment will be worth R1070. Therefore, if you can choose to have R1000 today or R1000 in one years time, you would always want it today instead of some time in the future. Now lets look at the reverse of this, to see how the time value of money can work against you. Suppose instead of receiving R1000 that you spent R10000 by buying something on your credit card. Remember that a rand today is worth more than a rand tomorrow, so in this case, you will have lost money because you will need to pay off your credit card using money from the future (which is worth less than money today). In addition to having to pay with future money, you will also have to pay the interest expense. So, in this case, if you paid off the credit card in one year (assuming 20% interest), youd have to pay R1200. You should think about the time value of money in your financial decision making. Understanding the compound effect of money The compound effect of money is the most important law of finance, and the one most likely to make a huge difference toward growing your long term wealth. Lets look at how it works. Suppose that you invest R1000 in a savings account at an annual return of 7%. In one years time your investment will be worth R1070 (R1000 + (R1000 x 7%)), effectively yielding a R70 gain. However, at the end of year 2, the same initial investment is worth R1144.90 (R1000 + (R1000 x 7%) + (R1070 x 7%), yielding a R74.90 gain. In year 3, the same initial investment would be worth R1225.04, yielding a gain of R80.14. By year 10 the initial investment would be worth R1967.15, and by year 25 it would be worth R5427.43. From looking at this example, you can see that investing R1000 today is much more valuable that investing R1000 in a few years time. In order to build wealth, you need to utilize the benefits of the time value of money and the compound effect of money. Take appropriate risks If you want to make money, you will need to take some risks. But how much risk should you be taking Youve heard that the higher the risk the higher the reward. Does that mean you should be taking the most risk possible The answer to this question is that you need to be taking the risks that are appropriate to you. This will depend on two things, namely your time horizon and your aversion to risk. Your time horizon means the time frame that you will require the money to be available in. If you are close to retirement, you will typically have a short time horizon, as you will require access to your investments shortly. You will also typically have a strong aversion to risk, and will want to be in less risky investments. If you are young and 40 years away from retirement, you should probably be investing in more risky investment products, as you dont need the money any time soon, and can afford to take some risks that could produce a high return payoff. Save money Youve heard the saying: A penny saved is a penny earned. This is very true. To build wealth you need to start saving. You can do this in many ways. Find every way possible. One way of saving is to forego a purchase today that you can put off until tomorrow, or next year, or in five years time. The point is this, you need to start saving today. QUICK TIP Your Credit Health Report is your financial reputation. Make sure it only says good things about you. This is the first step to building wealth! Buying a home By Credit Health So you feel youre ready to buy a home From bonds to estate agents, the process of buying a home is reasonably complicated. In this article, Credit Health shows you the basics of the home buying process and gives you tips for getting the best deals. Read on to start your training. Step 1: Deciding to become a homeowner So, you think you may be ready to stop being a renter and start being a homeowner How exciting! Owning a home is probably one of the biggest decisions you will make, and also one of the biggest purchases youll ever make. Before you start shopping for estate agents, use the following checklist to see if you are really ready to own a home:

• How long do you plan to stay in the home Its best to think about buying a home if you plan to remain in the area for at least 3-5 years.
• How does your rent compare to your estimated bond payment Normally your bond repayment will be more than your rental, and this means an additional financial commitment.
• Are you ready for the responsibility of owning a home More than just making bond payments, being a homeowner also means paying insurance, doing repairs, and sticking to a strict budget.
• Think about

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