Managing your budget is the only way to stay clear of bad debt. It will help you find a way to live well on less money than you’ve spent in the past, which in turn will assist you in creating wealth for the future.
HOW DO I SET UP A BUDGET?
Keep things simple. Draw up an Excel spreadsheet, listing your income sources and expenses. Distinguish between fixed expenses (such as bond, car repayment, insurance and medical aid) and variable expenses (food, water, petrol, doctors’ bills and entertainment). This should assist you in determining how to spend your money, and record how you’ve been spending your money the last couple of months.
Stick to these simple tips, and you’ll start understanding where you can save every month:
1. Be realistic Fixed costs are initially fairly inflexible, but if you decrease your variable expenses, in time, you’ll be able to invest more capital into your assets. Don’t try to cut fixed expenses significantly; that’s unrealistic. Small savings make a big difference over time.
2. Distinguish between needs and wants Women tend to confuse these completely. Needs are those items necessary to sustain you. Wants are the things that enhance your life. If you can separate the two, it won’t be long before you can actually spend money on something that you want, without feeling guilty.
3. Don’t budget on a bonus People tend to live on credit (such as overdraft and cards) throughout the year, assuming they’ll receive a bonus that will clear that debt. But under current economic conditions, bonuses are a luxury — not a given.
4. Revisit your budget at the end of every month Complete your expenditure for the month too. Keep it simple, or you won’t stick to it.
5. Make adjustments to your expenses You need to be conservative and decrease one expense at a time. For example: pay off clothing accounts first and cut up the cards; next, clear additional credit cards — you only need one! Lastly, ask your bank to decrease your available limits to avoid temptation.
6. Treat savings as a bill Install a debit order on your account, as if your savings were an account.
7. Reassess the interest payable on your bond Shop around for an interest rate lower than the one you currently have. There might be administration costs linked to this.
8. Insurance Reassess your insurance costs with your advisor. Increasing security on your property should decrease costs. Old policies are probably more expensive than modern products. Never cancel insurance, but make sure you aren’t paying too much.
9. Keep an organised kitchen Clean out your pantry and store perishable food in sealed bags. Finish food such as cereals, biscuits and chips before buying again. You’ll be amazed at how much wastage there is.
10. Shop with a list Don’t wander down every aisle in the supermarket, only those that stock the goods on your list. It’s a fantastic way to save!
11. Shop at the store that is cheapest overall Surveys show you can save 10–15 percent on your groceries monthly. If your bill is R2500 a month, that’s R250 extra per month to pay off those debts!
The stress of worrying if you’re going to make ends meet is truly not worth that expensive pair of shoes or posh dinner. Avoid financial stress and let a budget help you understand what debt really costs; and the power of income.
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