The financial coach

Linda’s client Alison*, a single mother with two children, runs her own business. Although she earns well, she finds it impossible to save and is constantly under financial pressure. She borrows money at the end of each month and she consulted Linda to find out what to do about her situation.

Linda told Alison to take a step back to get a sense of the big picture. She had to list her known expenses and estimate what she would need to earn each month. “Invariably, clients discover that the figure is greater than their estimate,” says Linda. “They forget to add amounts for emergencies, holidays and so on.”

Linda then advised Alison to start saving each month — perhaps counter-intuitive, as banks invariably advise consumers to pay off debts and then save. “It is essential to create the right mindset, though,” Linda explains. “Once you force a saving and commit to it you are setting a goal. Goal-setting is part of your financial planning.”

Alison then had to create a spending plan, which involved calculating how much money she would need to make to come out each month, including the savings plan.

The spending plan
Linda and Alison came up with a figure of R41 000 — not too far removed from her R35 000 earnings.

This includes:

• R8 000 a month for day-to-day things like groceries, entertainment, clothes, shoes and so on.
• R15 000 to monthly debits off her account.
• R9 000 was for business overheads.
• R9 000 was her monthly savings goal.

“What was surprising was that Alison’s income was around R35 000 a month — she was already doing better than she thought she was. Her negative feelings were not a true reflection of her financial situation; rather, she focused on what her situation appeared to be. If she had managed her expenses as per her plan, she would already have been saving,” says Linda.

Setting financial goals
Linda and Alison then set some financial goals.

“With focused effort, Alison increased her monthly income to cover the saving portion of her plan. Her time management improved and she found she had more energy. So she felt better about what had previously seemed like a ‘hopeless’ situation.”

Setting small goals, which you review on a weekly basis, makes financial sense, according to Linda. “At the end of the week, ask if you have achieved your goals. If not, why not? Take ownership of those goals — that way, you can’t blame inflation, the state of the economy or anything else for not having saved a little bit each week.”

Now that Alison has determined where her money needs to go each month, she has confidently started a savings plan and set goals for her income figures. Her monthly goals have been broken down into weekly and daily goals. She has identified which actions need to be carried out and she sticks to her income-allocation plan.

“This allows for clarity and ultimately for financial peace of mind,” says Linda.

“After all, figures are just figures — you have to take emotion out of the equation. Be clear about what you need and what you want. Alison’s problem was that she was going over budget and was not keeping track of her expenses.”

* Name changed

Linda’s key points:

• Create your own financial blueprint by drafting a spending plan.
• Compare the budgeted amount with the actual amount spent by reconciling your bank statements.
• Commit to saving, or increased saving.
• Open a separate savings account to get you started.
• Have one or two very clear goals, which you review and update on a regular basis.

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