A GOOD dose of financial discipline over the holiday season will spare the family future headaches and lay the foundation for good spending habits and sound financial principles.
Old Mutual’s Crispin Sonn lists 10 steps to manage your money better, adapted from Old Mutual’s On the Money financial education programme. Where am I?
• Make a list of what you spend. Nowadays, money can seem unreal, just a swipe here and there and a number on an LCD screen. Many of us know that we’re not doing well financially, but hide from the uncomfortable reality until we are forced to face it.
• Write down your fixed expenses: for example, rent or bond instalments, union membership fees and insurance premiums.
• Now list your variable expenses: for example, food, transport, rates, cellphone, entertainment and clothing. Don’t sabotage your efforts by underestimating costs.
• List your irregular expenses: for example, car maintenance, home repairs and so on. Try to work out an average monthly cost. Again, when in doubt, it’s better to slightly overestimate than get caught short.
• Lastly, add together all your cost estimates. If the total is more than your earnings, you need to act. But pat yourself on the back first: now that you know exactly where you are with your spending habits, you’re already in a stronger position financially than many of your friends. Back in the black
• List your expenses in order of importance. You need accommodation, transport and food, but consider whether you can reduce or even eliminate some of your other expenses, such as entertainment and clothing.
• Now use the money that you’ve cut out of your budget to immediately start servicing your debt, especially credit and store card debts.
You’ve got the power
• Establish a basic emergency fund for unexpected expenses, once you’re debt free. A month’s salary is a good start and while it may take a while to build up, it’ll give you a real sense of security once you have it.
• Invest some money each month for your financial goals, like saving for your retirement and your children’s education. This excludes your employer’s pension scheme or your own retirement investments. Also remember that an accredited financial adviser can help you to establish your financial needs.
• Empower yourself with knowledge.