“Cut your coat according to your cloth,” another way of saying “live according to your means” is advice my mother repeatedly gave me during my school years. Of course growing up, my “cloth” was my pocket money, so life was pretty simple … until I got my
Because I was used to living on so much less, I had most of my salary left at the end of each month. But, just as air fills the space it’s in, regardless of the size of that space, money is similar in that unless we budget, we tend to use whatever is available. As my expenses increased, I had to change my thinking around all aspects that would affect my budget.
Here are some of the basic principles I follow:
The financial foundations of your life should be firmly in place before any other spending is even considered. These include life cover, medical aid, education, housing, transport and an emergency cash fund.
Stop orders and debit orders are a good way to ensure that essential expenses (including savings) are automatically deducted from your account, before the money is spent on non-essential items.
Aim to set aside at least six months’ worth of your current salary in an emergency fund. This amount should be instantly available to you (e.g. a money market account). Relying on savings in emergencies could result in you having to sell units when the markets are down, resulting in a loss.
Cocktails, birthday gifts and take-aways are items we typically don’t budget for and yet, collectively, they add up to more than one would expect. The R20 you would spend on your daily latte could actually be adding up to a sizeable investment amount.
Make a list of all the people you’re likely to buy gifts for during the year, and then get all those gifts during the January sales.
Physically drawing money and paying for all your daily expenses keeps you in touch with how much you are actually spending. We get so used to swiping our credit cards, we often don’t even check the slip before we sign!
We live in an age where we can access almost anything immediately. This is made even easier with credit cards, overdraft facilities and HP agreements. Always consider the financing costs when not paying cash. Very often you’ll decide the item that you planned to purchase isn’t worth it.
As soon as something breaks, fix it! Your home is probably one of the largest purchases you’ll ever make. Do your bit to ensure it grows in value.
Money spent on continuing education is an investment in yourself. Set personal goals and reward yourself when you achieve them.
Budgeting goes beyond physical rands and cents. It extends to the choices we make every day and how the consequences of those choices come full circle and directly influence our budget.
Lastly, enlist the help of a qualified professional who can help you not only with budgeting, but with putting together a long-term financial plan to ensure your financial security and peace of mind.
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