Nicolette Mashile is an entrepreneur, TV presenter and financial educator who is passionate about helping South Africans manage their money better! Please follow her on Facebook at FinancialFitenssBunny, on Twitter at @ImcocoMash or on Instagram at NicoletteMashile.
Listen to the chat we had via FaceTime about what she calls a Spending Plan. I’ve highlighted some of the main points below the video.
00:36 – Budgeting has a bad rep!
I like how Nicolette starts off by acknowledging the negative perceptions around budgeting and that people are either afraid to budget or that they feel it’s too restrictive. She rather speaks about a Spending Plan and although it’s similar, it’s a different mindset.
Basically you can allocate an amount of money per category and once you’ve spent it, you don’t spend anymore. You could draw cash and actually use the “envelope system” where you keep cash in envelopes for various expenses. You can also get the same effect by creating additional accounts off your bank account (depending which bank you’re with). But you need a simple method to track how much you’ve spent versus what you allocated yourself to spend.
03:06 – But why have a spending plan or budget?
It’s easy to just spend and spend, and Nicolette says that she knows herself well enough to know that she has to put some controls in place! Isn’t that just awesome? It’s just a matter of managing yourself so that you can live your best life, within your means.
Another important tip that you’ll hear is that she saves 20% upfront whenever she earns money. Paying yourself first is a really easy habit that can change your financial future!
04:53 – How do you start?
The first thing to do when starting to manage your money is to be honest with yourself! We all have vices and we all have things that we like to spend money on. That’s okay (for now) as long as you are honest about it in your planning.
You really need to know how much you earn and spend and Nicolette gives great advice about going through your bank statements (and credit card statements). Simply take 4 different colour highlighters and highlight
- obligations – things that you legally are obliged to pay (ie you have signed contracts)
- living expenses – groceries, petrol, etc
- frivolous expenses – things that you don’t need
- over-expenses – areas where you always spend too much money (eg eating out, shopping for clothing, etc)
Some expenses could be frivolous and an over-expense… you can work out how to categorise things. Knowing these details can help you figure out where to start though and it’s a really important exercise to do!
Another idea is to create some kind of extra income for things that you really want. That may mean working extra hours or finding some hobby that can earn you some money. Creating additional income streams is unfortunately not so easy, but it certainly is possible!
08:46 – Create a buffer in your budget
I love the analogy of colouring in a picture and sometimes colouring over the lines. That’s how it is with a budget when we sometimes overspend. Instead of getting upset about it, rather plan for it and give yourself a little buffer. This also includes an Emergency Fund for bigger (and unavoidable) expenses that come up.
10:12 – Balancing the budget
It’s funny how people often lie to themselves to make their budget balance. You need to be realistic about how much you earn and spend and if the numbers don’t work out, then you need to cut down! You can’t simply put down figures to make your spreadsheet look pretty as that is completely pointless!
11:37 – We’re not financial advisers
Nicolette & I are not financial advisers or financial planners. We offer honest, practical tips on managing your money. When it comes to investment decisions or deciding how or what to do with your money, rather chat to a qualified financial adviser.
I can put you in touch with my own financial adviser if you like, just send me a message.
To be continued…
Hopefully you’re getting excited about starting to manage your money better! Don’t worry now you still don’t really feel like you know what you’re doing; that’s ok!
For now we’re just going to watch the videos and then in Lessons 4 & 5 we’ll put it all together in a practical way.
If you’re ready, let’s move on to Budgeting Course: Lesson 2 with Tebogo.