Bond repayments, rent, loans, school fees, municipal bills, medical aid, insurance, groceries… Making sure you have all financial responsibilities covered can be overwhelming especially at the beginning of a new year.
Mellony Ramalho, African Bank’s Group Executive: Sales, Branch Network, says the only way to get on top of your finances is to make a budget at the start of the year and stick to it. “Learning how to budget properly and sticking to a budget is a discipline that everyone should learn. A budget should make provision for the here and now, but also include room for future goals like retirement or education. How well you manage your money and payments now will determine your future financial wellbeing,” she says.
So where to start? “To draw up a budget, you need to make a list of your monthly expenses. Remember to include quarterly and annual expenses as well as daily cash spending. Include any policies such as retirement annuities, disability funds, medical aids and so on. Lastly make a list of all your debt repayments.”
Once a list of expenses has been drawn up start working on an income list. “Use current figures from latest payslips, bills and bank statements. Remember to include any additional income that you will be receiving for example, grants, incentives, bonuses or part time income, etc. Only add the additional income into your budget when you are sure of the exact amount that you will be receiving,” she adds.
“Now take your expenses and debt repayments and deduct these from your income to get an idea of what you have left over at the end of the month or if there is a shortfall. If you have a shortfall on your budget, in other words, you don’t have money left at month end, it may be time to cut back on luxury items that you don’t need. If you have additional income use it to try and pay off debt. Start with the credit with highest interest rate.”
Financial goal setting is then the next step. “Make a list of your short- and long-term goals, and know what they are. Think about things like growing your family, education, planning for holidays, savings needs, upgrading your assets and standard of living, and retirement and funeral cover needs. Determine when you want to reach your goals and how long you will need to save for those goals,” Ramahlo says.
She highly recommends including your family in your goal setting plan so that you can work together to reach those goals. “Remember goals will only be reached if you make them part of your budget and saving plans. Every family member needs to be committed and realise that they too will benefit from achieving the goals.”
Make sure your goals are realistic, achievable and measurable. “If you aim too high, you may get de-motivated and you will not be able to exercise the monthly discipline you need to get there. When setting your goals, also take into consideration your family’s needs and think carefully about these. For example, you should not buy a new car if school fees are not being paid. Goal setting can only be successful if you understand how to set your goals and then how to achieve them,” she says.
“Remember to reward yourself when you see improvements and good financial behaviours. Celebrate when goals are achieved. So don’t wait, get a budget going and make 2018 a financially positive one,” concludes Ramalho.