Tell your money where to go

Watch Episode 2 of the Change In your Pocket series for tips on how to draw up a budget.

– Video supplied by BrightRock

So you’ve just landed the job of your dreams along with that salary bump that’s going to solve all your money problems.

Reality check: unless you start taking control of your money now, today, immediately, your money problems are just going to grow and soon you’ll be looking for another job with a bigger salary, to “solve” your money problems.

The more we earn, the more we spend – and the more credit lines we’re given. The secret to wealth creation is not earning more, but spending less. In order to understand where your money is going, you need to have a budget. You have to understand what is coming in and what is going out.
To have a realistic idea of what you spend on average, you need to analyse your spending over three months. Not only do you need to review three months of bank statements and credit card bills, but you also need to write down everything you spend on a day-to-day basis. It’s often those small daily cash expenditures which really add up. You also need to take into account those less frequent expenses such as school fees, maintenance and home repairs.

Write down all sources of income and then assess the damage. If your monthly expenses bear little relation to what you earn, don’t worry ‒ you’re not alone. Most households are in the same position.The difference is that you are starting to do something about it.
We’ve given you a breakdown of what you need to include in your budget:

On the template you’ll notice there is space for emergency savings, general savings and retirement savings. Your actual budget may not contain all of these items but your ideal budget should. If you’re living within your means you should immediately include emergency savings in your budget. You also need to put something towards general savings, even if it’s just R200 a month.

You will also notice a separate personal budget. We run two different budgets in our family. One is the household budget which my husband and I both contribute to, and then we have our own personal budgets. This is what we spend on ourselves, and is mostly luxury money, so I’ve included a separate column for these items.

It is also important to include other commitments like payments to support family. Many people assist family members financially, whether this is a parent, a brother or a niece. I have specifically put this under fixed costs as it needs to be budgeted for rather than being an ad-hoc payment. It is important to have a clear idea of how much you can afford to assist family members, and to limit your assistance to what you have budgeted for.

Make sure you capture your annual payments. Some bills are only paid quarterly, yearly or bi-annually – school fees or car service for example. You need to calculate how much this translates to each month so that you can put money aside to meet those bills. You don’t want to be pulling out the credit card when time comes to pay them. These are also great expenses to pay out of your bonus or 13th cheque.

Understanding your expenses is only the start of the journey. If you want to find that extra cash each month in your budget, the next step is to start becoming more conscious of those day-to-day expenses by writing down what you spend as you spend.

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