“A budget is telling your money where to go; instead of wondering where it went”- John C. Maxwell. He is a phenomenal leadership guru who could not have said it better, the budget never leaves you wondering what happened or you try to figure it out what happened, however this road map to financial wellbeing & freedom – budgeting is the answer to our financial problems and there is no way around it or no way to avoid it, if you are serious about improving your financial well being. Today, I will be showing you how to appreciate this wonderful tool and what it can do for you to achieve your own financial freedom.
“I cheated on my fears, broke up with my doubts, engaged with my Faith, and now I am marrying my Dreams-The quality of your thinking determines the quality of your Life” – Bernard Shaw.
It begs the question of who is controlling your financial destiny; it is YOU, and so if you recognize where you are going then you can attain it, spending planner(budgeting) is a helpful tool that any person can use. It helps to manage and manipulate month-to-month expenses, financial savings, and debt
- Understand where all your Rands(other currencies as well) and cents go
- Help you save and invest for you & your cherished one’s financial future
- Getting out of excessive debt and construct monetary wealth and freedom.
Here is a kicker, we pay attention to the speech of the finance delivered by means of our esteemed Financial Minister her in South Africa, each and every year, yet we seldom put into exercise and we criticize that it does no longer work or it does no longer go some distance sufficient – it is exactly this lack of transparency & accountability that we avoid going through and deal with our own “skeletons in the closet”; if we don’t, then who will? If we are waiting for our government officers to be held accountable, transparent and supply services to a range of communities with diligence, should we not be the first to be held accountable to ourselves & loved ones and practice what expect and preach? It makes you think, doesn’t it?
Firstly, let us take a test to see if you are in control of your personal finances
|I know and understand my payslip|
|I know exactly what I earn|
|I know and understand the total amount of deductions on my payslip|
|I know how the UIF deduction is calculated|
|I know and understand how my employer has calculated and deducted the correct amount of tax, medical aid, pension or provident fund|
|I know and understand other non-obligatory ad hoc deductions, such as but not limited premium on policies, parking, canteen, union fees, garnishee order|
|I know exactly how much money my employer pays over into my bank account|
|I know and can track how much I spend each month|
|I keep a record of my monthly expenses each month|
|I know exactly how much money I owe each month|
|I do my budget and try to stick to it each month|
|0-3 YES; No control over your personal finances (Need help/intervention)|
|4-7 YES; You show understanding (Need improvement)|
|8-11 YES; You’re in full control; keep it up & keep innovating|
Table extracted from Old Mutual
Normally, the budget has a terrible connotation as it creates stress and less self-belief in coping with non-public finances; due to the fact if it does NOT work out, it increases tension and resulting in failure. We recommend you either buy or download MoneyLine personal finance software that allows any man or woman to discover endless possibilities and opportunities, as a substitute than limiting one to what is available. I would recommend you use it as it works like a charm. It splits the expenses, financial savings, investments, and debt into various categories, We recommend that you use this breakdown below as it has strictly considered fairly balanced money management principles:
40% Fixed costs(household spent- (eg. Food, Electricity, Clothes, School fees, Transport)
25% Financial offerings long term goals(eg. Retirement, Pension/Preservation Fund, Funeral cover, Medical cover, Unit trust)
10% Debt goals(eg. Car payment, Personal loans, Credit card, House loan)
25% Savings short term goals(eg. Emergency fund, Fixed Savings Account, Call Account, 32 days account)
To help minimize expenses(outflows) into a few manageable classes that will allocate your paycheck easily:
When you work out how much you have(nett salary) and then break down and work out the following:
- How much do you currently spend(household),
- How much of it you keep(savings & investments)
- How a good deal you owe(debt) and
- How much you keep in the direction of financial services desires (unpredictable & unplanned conditions such as death, accident, medical expenses) just to mention a few.
When you work out how much you presently spend, then use the MoneyLine tool to also include:
- Fixed expenses(pay each month & regularly – e.g. rent, car, house payments
- Variable expenses(pay every month however they change – e.g. groceries, electricity, transport)
- Irregular expenses(only take place each now & then – e.g. holiday, birthday, Unplanned medical expenses, and
- Include ALL Debt in your planner
Once the MoneyLine(budget) exercise is completed, the balancing line will come to be really seen the place you are balancing the books is both positive(black) or negative(red). You’ll have to face the facts and be realistic about your spending patterns and put plans in place, either to increase(earn additional income) or cut down on spending or manage your debt so that you can balance the books returned to nice bottom line.
- Be sensible about your spending planner(be more straightforward and honest) about how much you earn, how do you decide to spend your income and where do you spend it and with whom and be disciplined about your spending patterns and your money
- Differentiate and prioritize between wishes and wants, so that you spend on necessary simple desires such as meals & water, roof, simple health care & hygiene & clothes on your back(comfortable & excellent dressing and not fancy famous manufacturer brand labels)
- Everything past this, a massive 4×4 or SUV vehicle or triple storey house, manufacturer clothing names, fancy & steeply-priced meals & drinks is a “figment of our imagination” and let us be straightforward here, it is a want, due to the fact you can’t come up with the money for it, let alone hold it. It states that you cannot afford it otherwise why do you charge it to your credit card.
- Impulsive or unplanned spending is driven by user needs or wishes or competition that only resides in our hearts(emotions) and no longer our heads(reasoning), these movements can have dire spending consequences(constraints) that should arise as you sacrifice your fundamental wishes for unnecessary wants, thus, it is necessary to make properly concept out steps to reach informed decisions.
- Review your spending patterns(ultimately balancing the books) as your needs and wishes grow or exchange or while going through a time in your life.
- Make it a routine to evaluate your spending patterns on the MoneyLine tool on a pretty ordinary groundwork and keep track to ensure that “the money went to the exact place you said/planned it must go” to avoid costly mistakes or surprises.
- Forgive yourself( do not panic), we are all human, you’ll probably not get it right to get your books to balance as you planned, the first time; consequently, do not keep a grudge towards your self for not assembling your financial desires and goals.
However, please do not misunderstand and misquote me, it does not imply you should now not or cannot revel in Life, Life needs to be lived within reason, treat yourself to the Life’s indulgences and luxuries, but do it all in a way that you can AFFORD(frugal but not cheap – within your means) to do so.
Benefits of budgeting_Spending patterns
- You can clearly see in black and white how a good deal or whether or you no longer spent extra or much less than you earn.
- Having a spending planner in front of you, helps you to recognize almost at once and become aware of what, how, where, with whom you’re spending for and things you shouldn’t be doing.
- It helps you get a better and clear overview and grasp on how you are doing overtime in the long run, as you can extend your columns in your spreadsheet to cover a year.
- By often looking at your spending plan, you get an experience of relief and pleasure that all that needs to be taken care of, has been taken care of – yours and your cherished one’s future; so you can plan and live with confidence.
- It helps every person in particular household contributors( family & kids) to come to an equal level of grasp because anyone is allowed to take part and be involved in the method of attaining an informed decision.
- Creating a preference spending planner helps you get prepared financially and assists in being prepared for what is going to be required to make it happen and work
Parting shot on using the tool effectively
As a last thought, see this as a new day, second chance, an opportunity, to strive again and see it as a treasured gift or lesson to be learnt and have a good time the milestones achieved consequently far and possibilities to discover other selections reachable and now not see it as a curse, a grudge or a chore.
As the famous saying goes” You can’t effectively manipulate what you can’t measure”, so to correctly control and manage your money(income) you want to be clear about what exactly is your household income. If you are single Mom or Dad or Granny then it will be a single income after-tax & deductions. If you have a partner(spouse) both your household profits are a joint income (after taxes & deductions) of all the humans sharing your family and how much available resources(money) you have access for spending, saving and investing and debt.
When calculating family income, endure this in your thought to encompass all different sources of income; e.g. your partner’s income after tax & deductions, more If you are a single Mom if there is income for maintenance payments, baby grants, disability payments, monthly pension, as income profits of lodgers(Granny’s flat – spare rooms), part-time job, sideline interest business(selling arts & crafts online, pap & vleis) at a soccer game or find business opportunities online, owning a taxi, spaza shop(run a tuck shop); tell it all and everything. Using your payslip; you can then calculate your family income above.
Understanding and calculating Total Household Income and undertaking the preference spending planner(budget) procedure is essential, especially if the household is thinking about their financial future, savings, shopping for a vehicle or a home or enrolling teenagers through University or greater education or any other monetary decision. You can use MoneyLine Reports for your family household expenses and repayments by categories over a duration of 12 months, doing it on a month-to-month basis, to see how far you have come.
In the end, it comes down to appreciation and knowing(comfortable feeling) how money is coming in(inflows) and how much is going out(outflows) and how much is saved. In the closing evaluation, it is now not how much you earn, it is how much of it you get to keep so that you can grow your wealth and ride the economic freedom wave, so it is possible with monetary astuteness and basic economic planning with discipline.
One-on-one engagement to master the budgeting principles further
During our one-on-one coaching session, we dive deeper and we painstakingly go through every line object like a pleasant teeth comb to understand the background, the intentions of your spending pattern, as it will help to clarify your concept thought patterns as well as your behavior.
Please leave a comment, a query or share your story and we promise we will get back to you.