According to the latest Old Mutual Savings and Investment Monitor, around 41% of South African consumers are flat broke long before month end – a phenomenon that TNC Wealth Partners founder Samke Mhlongo attributes to a poor savings culture, inadequate understanding of inflation and a lack of knowledge around how compound interest works.

“The mistake many people make is that they try to maintain the lifestyle they’re used to instead of making the necessary sacrifices to live within their means and settle their debt as soon as possible,” she says.

If you’re going to have any success at breaking the cycle of living from paycheque-to-paycheque, the critical starting point has got to be a significant adjustment in your spending habits.

Mhlongo unpacks her six steps to regaining control of your finances.

1. Gather all relevant information

The first step requires you to gather all the important documentation that you will need to get to grips with your financial situation.

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This includes your ITC credit report (you are entitled to one free report per year), three months’ bank statements, your personal balance sheet and your income statement.

2. Analyse the documents to understand where you stand financially

Use your ITC report and bank statements to complete your personal balance sheet and income statement.

A balance sheet should detail all the assets you own and any outstanding liabilities and debt. It should also include the money that’s coming in (inflows) and how much is leaving your account (outflows). Once you have jotted all of this down, you’ll be able to see clearly exactly where your money is going and identify the holes that need to be plugged or managed.

3. Reduce expenses

No plan for getting your finances under control can be executed without making cutbacks somewhere. Have a look at what you spend on luxuries and see what you can cut back on. A good place to start is cancelling that gym contract that you never use, cutting back on entertainment expenses (this doesn’t mean cutting it out entirely, just scaling back) and spending less on food.

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Another good way to save is downgrading to a less expensive car if you’ve got massive car instalments.

4. Supplement your income

Look into ways of increasing your income by asking for a raise, finding freelance or part-time work or monetising the skills you possess.

5. Prepare a budget

You’d be surprised at how many South Africans simply wing it and don’t have a formal budget. Prepare a balance sheet and income statements forecast, and give it a time frame. This will highlight your financial goals and help you adjust your behaviour in line with them.

6. Update regularly

Repeat these steps monthly by reviewing your actual financials to your budgeted financials and make the necessary adjustments where needed. If you’re struggling, it’s advisable to seek professional help from a financial adviser.