Financial tips: How to make your money work for you

Financial tips: How to make your money work for you

Private Property South Africa

In order to be financially free, you need to manage your money effectively and make it work for you. Here are some tips on how to do that.

Many people grow up having conflicting values around money and wealth and misunderstanding how they work together. Often a person may say they want to be wealthy, but what they really want is financial freedom. It is of crucial importance to manage your money effectively, master it, and instruct it to do what you want it to do for you. You’ll start seeing how your money can work for you when your future needs become more important than your current wants.

Money is what makes the world go round. Just like you have a job, your money has a job too, and it should work just as hard for you, as you have worked to earn it. Whether you’re a stay at home parent taking care of your home and family or a professional working crazy hours, having money in the bank is essential.

All is possible through either investing or saving part of your hard-earned cash every month. There is a clear difference between investing and saving. Saving is storing your money, while investing is growing your money. One of the significant differences between the wealthy and not so wealthy is that wealthy individuals earn interest while everyone else pays interest.

“The way that the prosperous continue to build their wealth isn’t really a secret; they spend less than they earn, save the difference, and let the potential of compound interest make their riches grow. Financial wellbeing is a long-term commitment, but with the right guidance, discipline and savvy decision-making, you may achieve your goal sooner than you think. It is never too late to start investing in your financial well-being.” states Craig Hutchison, CEO Engel & Völkers Southern Africa.

Here are some pointers on getting your money to start working for you:

Get out of debt

Your money doesn’t really belong to you until you've paid off your debt. This includes all debt, even if it is good debt. Your extra cash is better spent towards growing your net worth before anything else.

It may seem like a problem that is too big to tackle. The trick is to start by just clearing up your smaller debts and then work towards tackling the larger debt with the extra money that you have available.

Take a moment and just do a quick calculation of how much you pay monthly just on interest – imagine having those additional funds each month. As you pay off more debt, and then apply that money to the next debt, you begin to build momentum and you will be surprised how quickly you can be debt-free.

Have a budget

Your budget is the best tool you have to give you control over your finances, this will allow you to make financial decisions at the beginning of each month by telling your money where to go instead of later wondering where it went. Always pay yourself first – make sure putting a little away for the future is your number one objective.

Once you have mastered budgeting, you will be able to reach your financial goals more quickly and avoid debt. Now that you have a flowing stream of savings coming your way, you are ready to put it to work. The next step would be to choose a vehicle for growth that suits your lifestyle and your long- and short-term goals. Consulting a financial planner can help you find the right fit.

Grow your wealth

You don’t have to be extremely wealthy to take advantage of investing over time, you might not be able to stop working and just live off your dividends any time soon, but the rewards will pay off in the future. It is important to remember to diversify your portfolio; you should never want to have all your money invested in a single spot, venture or business.

“Be careful who you trust with your money, make sure you invest your money with a reliable and established company with a solid history and reputation, do your research and do not be afraid to ask questions” Craig advised.

The pros and cons of popular investment options:

Retirement fund

The key to retirement is to start investing as soon as you can. Your retirement savings are dependent as much on your ability to be patient and to leave your nest egg alone, as it is on the contributions you make every month. Make sure you have a good financial planner to help you invest your money.


  1. Income tax benefits
  2. Possible employer matching your monthly contribution
  3. Loans in the event of an emergency or financial crisis


  1. Most plans have limited flexibility as it relates to quality investment options
  2. Fees can be high
  3. There can be early withdrawal penalties

Unit Trusts

A unit trust pools money from many investors, to invest in assets, namely shares, bonds or property. Instead of having to select individual investments yourself in hard to reach markets, a unit trust offers you exposure to a range of assets, which are selected and managed by investment professionals. A unit trust is a smart way to save and beat inflation. As the cost of living increases, you need your money to increase with inflation, investing in a unit trust allows your money to do just that.


  1. Funds are managed by experts
  2. Stockbroker fees may be negotiated at a lower rate
  3. Easy diversification - investing in a variety of securities


  1. There are costs over and above those you'd pay if you were investing directly
  2. Unit trusts may not be as liquid as some other investments
  3. Reliance on managers to select the best appropriate funds

Stock market

The first step is to gain a good understanding of what the Johannesburg Stock Exchange (JSE) is all about. Speak to a stockbroker about your investment goals. The JSE has a variety of products which can help you reach your desired goals. One of these is a tax-free savings account (TFSA). A TFSA is an account that provides tax benefits for investing, and the JSE TFSA provides investors with a way to invest in Exchange Traded Funds (ETFs). ETFs are ideal for first-time investors exploring the stock market.


  1. Highest returns
  2. Income from dividends
  3. Stocks are highly liquid


  1. Volatile in the short term
  2. If you pick the wrong stock, you risk losing the value of your investment
  3. It takes knowledge and time to analyse a stock


This is a book-based savings account made up of a group of individuals with similar goals, which allow them to save for a common purpose. Members contribute fixed sums of money to a central fund on a weekly, fortnightly or monthly basis with a better return on savings and interest rates. The group then decides on how that money is shared, whether it is a monthly pay-out, or invested and then shared at the end of the year. Originally these were informal savings agreements, but it has evolved and banks are now offering savings products specifically designed for stokvels.


  1. Can be set up informally as they are not legal entities
  2. The costs of running a stokvel are quite low
  3. Individuals who are part of a stokvel can perform its activities outside of interference from the government


  1. Enterprises obtain a lack of cost advantages due to the size of operation
  2. The prospect for growth is limited
  3. High risk - the scheme is based on trust


A share is one of the equal parts into which a company's capital is divided, entitling the holder to a proportion of the profits, if any are declared, in the form of dividends. You don't need thousands of rands to start investing in shares. Imagine you want to invest in a company worth a R100 000, but you don’t have R100 000 to buy it, or the owners don’t want to sell all of the company. Buying shares is exactly what it says, you buy a share of the company.


  1. Potential capital gains from owning an asset that can grow in value over time
  2. Potential income from dividends on share holdings
  3. Lower tax rates on long-term capital gains


  1. Share prices for a company can fall dramatically
  2. If the company goes broke, you are the last in line to be paid, so you may not get your money back
  3. The value of your shares will go up and down from month to month and the dividend may vary

Krugerrands or gold

Another option to diversify your portfolio is to invest in something even more solid such as Krugerrands. These gold coins tend to perform well in highly uncertain circumstances, and can provide protection against extreme market turmoil.


Bitcoin is an online payment system. This system is peer-to-peer, and users can transact directly with each other all over the world almost instantly, without needing an intermediary such as a bank, Western Union, MoneyGram, PayPal or any other company. The Bitcoin system works without a central repository or single administrator, so is the world’s first decentralized digital currency, and it is the largest of its kind in terms of total market value.

Bitcoin cash was created to give people a way to send and receive real money anytime, anywhere, without the intervention of banks and governments. Bitcoin cash has value because the holders of the Bitcoin core collectively agree that it has value. Such mutual agreement between thousands of buyers and sellers around the world enable Bitcoin cash to be used as medium of exchange in online transactions.


  1. Not tied to any traditional financial institution or government
  2. Traders can remain anonymous
  3. Access to historically inaccessible markets


  1. Inherently volatile
  2. Subject to fluctuations in value that can be more sudden than government-backed currency
  3. Not backed by legal protections


Investing in property is often seen as the safer and less volatile choice as it requires a long-term approach. Although with any investment, you do run a risk such as a market or area dip or interest rate hike, this remains one of the best investment options as people will always need to have a home and no matter how big the dip – you won’t lose everything completely – the home is still there and it’s yours.

There are various options to consider, namely buying a single home to live in as your investment, or investing beyond your home - in land to sell, commercial property or homes to rent out. Real estate is a favourable investment option because it does not only give you long term growth, but it can be paid up completely and become your sole property whilst still generating an ongoing income if you choose to rent it out.

“Having personally invested in a number of the above options, I can with confidence say that property has been a solid investment. You only need to think about what you paid for your first home if you have been in the property market over an extended period of time or alternatively ask your parents what they paid for their first home. I always say that you should get your home valued at least every 5 years so that you know what your investment is doing for you. Property truly gives you the best of all worlds as you get to enjoy it while living there, enjoy rental income if you choose to let, the satisfaction knowing it’s yours and only yours once paid off, and of course the reward of knowing you have something to leave behind for your children someday” Craig added.


  1. You could earn monthly rental income if the property is rented out
  2. If your property increases in value, you will benefit from a capital gain when you sell
  3. Property is less volatile than shares or other investments


  1. There may be times when you have to cover the costs yourself if you do not have a tenant or for repairs
  2. A rise in interest rates will mean higher repayments and lower disposable income

It is crucial to realise that money is a tool that can help you achieve your ultimate goals in order for you to reach true financial independence.

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