There seems to be a struggle for most people to prioritise savings over borrowing.

Excess credit card use can cause you to spiral into a black hole of debt, while investments have the potential to make real returns and can (depending on the investment product – e.g. a retirement annuity) safeguard your money.

It seems like a no-brainer that the latter is the favourable choice. So, why is approximately half of the consumer market struggling to pay their monthly debts?

A change in mindset is needed to break the cycle and help save money, not borrow it by using a credit card. Once you’re saving, it’s worth considering investing in an investment product or unit trusts directly to help play a part in paving the way forward.

The credit card

Every time you swipe a credit card, you are borrowing money from prospective future earnings; essentially, spending money that you don’t have. The ‘buy now, pay later’ concept is seductive and can become its own financial monster. So, how do you change a situation of seemingly never-ending spiral of debt?

Take the first step: don’t spend more than you earn. Rather, make a realistic budget and stick to it. Once you’re saving money, consider investing it.

When should you start to invest?

The best way to begin is to think about your financial goals. In this regard, perhaps speak to an experienced financial advisor about investing in unit trusts. A unit trust is a type of investment that offers easy access to the financial markets and has the potential to increase your wealth over time.

It’s a good idea to start investing as soon as possible. Time can be your friend when it comes to investing. The longer you wait to start saving, the more you’ll need to contribute to reach the same goal.

Choose your investment based on your financial objectives

The type of investment product you choose must be aligned with your specific financial goals. A financial advisor will be able to guide you through the options that suit your needs.

If, for example, you’re looking to save for your retirement, then opting for a product such as a retirement annuity would be beneficial because your contributions are tax-deductible, and the money is safeguarded due to restrictions relating to this type of investment.

Checklist to help you change your financial mindset

• Start saving as early as possible.
• Lessen your current debt where you can and avoid getting into new debt.
• Don’t spend more than you earn.
• Save money before spending it. It’s best to make a budget and ensure that you follow it.
• If you can’t purchase something with a debit card or cash, rather consider not purchasing it at all.
• Once you’ve decided on investments that suit your needs, decide on a fixed annual increase on your contributions.

The key aspect to remember here is that saving money always beats borrowing. Reducing your debt and investing in a savings product, can help you on your journey to financial wellness. If you’ve been living above your means, it may not be easy to cut back, but it’s important for the longevity of your future wealth.