The older I get the faster time goes by, and 2008 is no different. This hit home during a recent visit to a superÂÂmarket, where I spotted Santa and his reindeer flying across the canned-goods aisle with the week’s special in their wake.
With Christmas on the way, the countdown for gift shopping has begun. If you, like many others, have not been putting money aside, you are going to have to make a plan – fast. With that in mind, the theme for this month’s column is budgeting.
Don’t delay, budget today
Budgeting is the only way to plan for those special occasions or events that require money. In fact a budget should be used every month to help you manage the household finances. This valuable tool guides your monthly spending in a responsible way so that important financial obligations, such as bills, are settled first. Without a budget you could easily overspend and be forced to find other ways to make up the shortfall.
Income and expenses
Success in drawing up a comfortable budget lies in knowing yourself and your attitude to money. Be disciplined about the way in which you allocate money for various expenses. To start, list your household’s monthly sources of income after tax and add these up (salary, overtime payments, and so on). This will tell you how much money you have between now and the next pay day. You still need to account for your expenses, so list all these (rent or bond, car instalments, policies, school fees, groceries, clothing, petrol, medical bills, telephone, cellphone, water and electricity, bank charges, entertainment) and add them up too.
Surplus or shortfall?
Using your two lists (income and expenses) and their subÂÂtotals you can, by subtracting the expenses from the income, determine if your budget reflects a surplus or a shortfall.
A surplus means you have extra money, so you could shop around for a bank account offering a high interest rate and save this money. A shortfall means you do not have enough money to meet your expenses based on your current income. You will need to revise your budget and you may even have to find ways to supplement your income. Always look for ways to cut expenses and increase income.
Budgets seldom work out on the first attempt and sacrifices may have to be made. Remember that practice makes perfect, so do not be disheartened if it doesn’t work out at first.
Borrow responsibly
Many consumers find the lure of credit hard to resist and see it as an easy way of to finance their lifestyle.There will always be a place for credit, but there’s a lot to be gained by planning ahead and being budget-wise. Credit is not bad when used responsibly because it offers short-term convenience and builds a good credit profile if correctly managed. If you use a credit card, for instance, calculate the monthly repayments before you spend, so you know whether you can afford it. The problem is the lack of discipline consumers display when they spend. Opt for registered credit providers so you are protected from exploitation by unscrupulous lending practices.
Wants vs needs
Learning to separate wants from needs is an important aspect of financial responsibility. Wants tend to be luxury items and the pleasure you get from acquiring them is often short-lived. Needs are those things you cannot do without. Be honest with yourself because wasting money on something that you perceive to be a need just reduces the amount of money you have available for the more important things.
Simplicity equals success
Live within your means. Sometimes changes in lifestyle are necessary. Consider the things that are important to you.
Drawing up a budget may not be as exciting as putting up Christmas decorations, but at least you will know where your money goes each month. For more information speak to an accredited financial adviser. The festive season is closer than you think, so start budgeting today.
Jason St Leger Seaton writes for the marketing and corporate affairs division at Capitec Bank. Brought to you by Capitec Bank