You’re not the only one losing sleep over your bank balance at the moment. Everyone’s facing tough times, but with our easy guide to no-deprivation fiscal fitness, you’ll soon be able to afford those things your heart desires.
1. HAVE A ONE-ON-ONE WITH YOUR BANK STATEMENT
The first step is to track your spending habits. Seeing the hard facts in black and white can be a bit of a wake-up call. Did you know you spent R600 a month at your local coffee stope Do you really need to eat out four times a weeka
Check your bank charges too, mistakes are more common than we think. Weigh up whether you are doing enough transactions each month to justify that hefty flat service fee — or would you be better off with a pay-as-you-transact arrangement. Call your personal banker or your branch and ask them to analyse your transaction history and advise you. Cancel services you don’t need. And “close any unused bank accounts as the service fees add up,” says financial consultant at Financial Focus, Alison Sparg. You’ll be surprised how many payments you agreed to make when times were good. It might be time to cut back on the unnecessary, and your bank statement will show you where those areas are.
2. LET YOUR VALUES GUIDE YOU
Often we’re conflicted about our buying decisions. “I know I can’t afford it, but I really want that designer bag”; “I want to stay out of debt, but I really need a new car.”
With your values firmly in mind, you’ll be able to resist temptation. If staying out of debt far outweighs having a new designer outfit, the lovely garments will no longer be so alluring. As Michelle Singletary says in her book, Spend Well, Live Rich: How to Get What You Want with the Money You Have (Ballantine Books), “If it’s on your ass, it’s not an asset!”
Remind yourself of what you really want in life, and what really makes you happy when you get the urge to spend frivolously. For this to be effective, you’ll need to know the difference between needs and wants. Sparg notes that knowing the difference may not be enough: “You also need to be honest about the difference between needs and wants!” she says. “Setting financial goals for yourself in the short- and longer-term will also help you to stay focused and resist temptation.”
3. DO THE MATHS
Need a new carn With this exercise you’ll know instantly whether it’s in reach or not, and be able to set financial goals in the short- and longer-term. If you remember this simple equation all the time, you’ll find it puts things in perspective. It may take a while to do the sums initially, but keeping a running mental total will help you to know where you stand fiscally at any given time.
Work out:
What do I owe (debt, loans, mortgage):
What do I own (property, policies, savings)?
What do I spend (monthly expenses)
What do I earn (monthly income after tax)s
Never budgeteda Now’s the time to get a handle on your cash flow. Your new-found control and confidence means you’re always in the know, and can make informed decisions about what you can and can’t afford. When you can afford something you want, you can enjoy buying it guilt free. Another reason to know your monetary worth is “to give you a snapshot of your financial life today, which becomes a point of comparison down the road,” says Ilyce R Glink in 100 Questions You Should Ask About Your Personal Finances (Three Rivers Press).
4. ABANDON THE PLASTIC
Have you ever caught yourself thinking, “well I’d better buy something else since I’m using my card, there’s no point in charging such a small amount”â It’s a fact that we spend more when we pay with credit. One study estimated grocery shoppers’ bills were 30 percent more when using plastic than when paying with notes.
It may also be more difficult to remember the amounts you sign for, and the frequency of swipes. A better approach would be to draw a fixed amount of cash, like an allowance, once major expenses and bills have been paid (including savings), for entertainment and incidentals. Each week, that amount is yours to spend however you choose, so you’ll have all the fun, while still being disciplined about how much you’re spending.
5. REGISTER FOR ONLINE GROCERY SHOPPING
Online shopping may be too easy, and it may be too tempting to overspend when clicking your way through clothing catalogues, books, gifts and gadgets — but when it comes to everyday groceries, it may be the answer, suggests Sparg.
“When you select the items you need from a list online, you can track what you are spending as you go, and you will be far less likely to impulse buy or get distracted by things you don’t really need,” she says. You’re likely to save more than the cost of delivery, plus it saves you time, so you’re freed up for fun stuff! Major retailers such as Woolworths and Pick ‘n Pay offer a home delivery service. See www.woolworths.co.za
You can also save by making healthy food choices (like fruit, veg, wholegrains, lean proteins, good fats) if you’re a Discovery Vitality member and you shop at Pick ‘n Pay. Register online for your HealthyFood card at www.discovery.co.za or by calling 086-099-8877.
Vitality members get 15 percent cash back on all healthy food purchases, and if you complete an online Health Risk Assessment, you get 25 percent cash back. For more, see www.discovery.co.za, under Vitality.
6. WEIGH UP YOUR CHOICES
Sparg recommends allocating a value to each purchase you make. This is a great way to learn which luxuries you can and can’t live without. Within your allocated budget, you can either have a new pair of wedges or theatre tickets; placing a value on each item or activity will help you choose which one will give you more satisfaction and enjoyment for your buck. “This approach recognises that we are all individuals and place different values on different items,” she says. And, it’s great way to save without skimping on delight!
7. TRY THE ONE-AT-A-TIME APPROACH
It can be overwhelming to overhaul your financial habits all at once. Why not tackle one area of your budget each monthr Start with what you spend eating out each month, then what you spend on clothes and cosmetics, entertainment, then gifts and so on. Within a few months, you’ll have done a thorough and considerate overhaul of your spending habits, without too much effort at all.
8. START SAVING
The long-term value of saving each month is underestimated. The law of compound interest says that a little cash stashed for longer will equal more than a lot of cash put away for a shorter period of time. Our ability to save has more to do with our mental attitude and financial behaviour than with how much we earn. While saving doesn’t sound very sexy, it’s the way to realise your dreams.
An automatic transfer or monthly debit order can make saving painless, as you don’t even have to think about it each month. Make sure your savings are in a separate account where you can watch them grow, suggests Sparg. It’s very motivating to see the tangible rewards of your financial discipline.
Before you know it, you’ll have enough for a deposit on your first home, or a cash sum which will save you paying expensive interest on that new car — now that’s rewarding! Don’t forget to increase the amount when you get a salary increase.
9. GET CLUED UP
The more you know about your finances and the economy, the better. Being well informed will not only give you confidence, but will also give you the background to make better decisions regarding your money.
Trevor Manuel’s annual budget speech is one of the most important sources of information about what’s happening in South Africa, and what is forecast for the coming year. Take note of interest rate hikes and global trends in the news. Now is the time for saving and consolidating. If you’re under pressure, spending conservatively will put you in a good position for economic upturn. If you do have surplus cash, now is a great time to pick up bargains in some asset classes, says Sparg. She suggests property and listed shares.
10. MAKE CLEVER CHOICES
Often, there are two ways of doing the same thing — the more expensive way and the cheaper way. By choosing the less expensive option, you get the same enjoyment, plus you have the added satisfaction of knowing that you’re making a wise financial choice.
So plan a special meal at home (such as a surprise candlelit feast for two on your balcony) or take a picnic to the beach or park instead of a pricey restaurant meal. Take out a DVD and dress some home-made popcorn in your favourite spice rather than going to the movies and buying the cola, popcorn and chocolate combo deal. Or explore the remotest corners of our beautiful country rather than going overseas, says Sparg. The joy and experience is the same, but the price tag to your pocket, the environment and your health is not.
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