plan – Take charge of your money

Keep Motivated

It’s easy to lose focus on your goals and to get stuck in the relentless routine of working to survive and surviving to work. The day-to-day rush of life can be exhausting and leave you with little time to sit back and think. There are however a few easy things that you can implement to help you stay focused on your financial goals.

checklist

Remind yourself everyday

A great way to stay focused on your goal is to remind yourself of it every day! Try one of these ideas:

Create an image to save as your background on computer or other device.
Get creative and make a hand-drawn poster stating your goal. Stick it up somewhere.
Type it up in a word processor and print it out nice and large to display.
Create a business-card cut-out that you can keep in your wallet.
Display your goal on a small sticker on the inside of your windscreen so that you see it as you start driving.
Use post-it notes around the office or house.

Track it

Visually track your progress. Either with a spreadsheet or a hand-written poster. I like to track my goals by months (years or days) left until the “due” date as well as a percentage of achievement. Financial goals are generally easy to calculate progress – if you have an amount and a number of months you can quickly work out a percentage of progress. This doesn’t work for all goals, but you definitely need to be able to track your goal else you’ll never know if you achieved it!

fullsizeoutput_864 — Here are my pay days until retirement (sticky notes stuck to my monitor) – more on this soon…

Discuss it

It’s vitally important to discuss your goals and progress with someone you trust. If you’re married this really should be your spouse as financial goals affect you both as a unit. If you are not yet married you could discuss these with a close friend or your financial advisor.

Talking about your goals make them “more real” and helps you to stay focussed as you are now accountable to someone.

Community

Find a like-minded community of people who can encourage you and keep you motivated. Real-life relationships are best, but an online community such as Twitter or Facebook can be very useful too.

Why Save?

This site is all about saving, budgeting and in general taking charge of your money. But saving is hard and requires you to make sacrifices. Is it really worth the effort? You might think that it’s silly to work so hard and then not spend your money; surely that’s why you work and earn money in the first place!

Well, to start with, you need to find balance as you do need to enjoy life and spend money on things that can bring you joy. You need to spend time with loved ones and have fun. There is an old saying “all work and no play makes Jack a dull boy”. We don’t want to become dull (and possibly cantankerous) simply because we focus so hard on saving that we forget how to live. To help you find this balance you definitely need to create a budget and a plan.

There is of course the concept of “living for today and enjoying each day to its fullest” but at the same time we need to look at “the bigger picture”. Saving is your tool to reach your goals and dreams. This is something that is completely in your control and the amount you save, the goals you make and the success is all up to you!

Many people feel that they simply don’t earn enough in order to reach any goals and thus don’t even bother trying. If you seriously look at what you earn and what you spend, you may find that there is actually more than you think. Unless you can find a way to earn more money, you should certainly be looking at where your money is disappearing to.

Here are some reasons why you should save (make your own list of keywords to get you started).

Better retirement plan
Less stress knowing that you have some money saved in the bank
A debt-free (thus stress free) life
Your children’s education
Your dream trip overseas
Your health (being able to afford better choices)

Why not start right away with your first goal?

A new way to measure your wealth

mansion Most people measure their wealth by looking at the value of their house and cars and other things they have. They see value and wealth in their “stuff”. Of course, you can include the value of your pension fund and other investments you have. This is definitely a valid way to measure your wealth (provided of course that the assets you’re taking into account are actually paid off), but I’d like to propose a new way to measure and track your wealth.

It all comes down to one simple question. How many months could you survive without a job? Another way to look at it is to remember that you could be retrenched or fired very easily – whenever your current employer decides that they no longer need you. How long can you survive without any income?

How to calculate this?

Firstly, you need to know what you monthly living expenses are. For this you need a budget. You can manipulate your budget a little as not having a job would definitely cause you to priorities your spending and you would almost certainly immediately stop all frivolous spending. Don’t forget about your debts as you would still need to be paying these! So know how much you need each month to service debts and survive?

Then, how much money do you have available? Think of any savings you have, or money that you could access. Only take into account money that is actually your own. By this I mean that you could possibly access a lot of money from your home-loan, or you could take a personal loan; but that is simply debt. How much money do you have that is your money and that you can access now? Some retirement and pension funds have rules about what age you can access the money at, so think about your situation right now. Don’t forget any other income you may have that would not be affected, such as rental, commission, royalties, etc (At this point we’re not looking at selling assets in order to survive, rather just look at cash and investments)

This excise could help you to relieve some stress if you see that you would actually survive many months without your income, but at the same time this could highlight to you if your finances are in a terrible state. Perhaps you won’t be able to survive even just one month.

When you lose your income, it doesn’t really matter what house you live in, what car you drive or how many diamond rings you have. These things can’t find you food on a day-to-day basis. Having lots of debt makes the situation worse and you could really end up in an awful situation!

The results:

Whatever stage you may be at, set yourself a goal to improve your situation.

0 months – This should be a HUGE WARNING sign to you to take charge of your financial situation immediately!

1 – 3 months – You are not in a great situation, but there is a little leeway should something happen regarding your income. Your situation is definitely not good.

4 – 6 months – You are probably better off than most people but don’t feel too comfortable here as things are still not great. You would most probably survive a job loss as you have some time to find a new job, but it would be a stressful situation!

6 – 12 months – If you are in this bracket then you should feel some relief that you could survive some tough financial circumstances. You are in a good position but don’t think about early retirement or that year of travel yet.

More than 12 months – well done, you are on your way to financial freedom! Don’t forget to keep checking your situation regularly and set goals towards the ultimate goal of Financial Freedom.

Pay yourself first

keyboard This is one of those things that you’ve probably heard many times before and you know you should do it, but most likely you don’t. So let’s look at what is meant by paying yourself first, and how it will help you save.

To pay yourself first really means that once you have set up a monthly budget and worked out how much you can save each month, then you should transfer that amount into a savings pocket immediately after being paid. If your bank allows, you can set up a recurring payment to transfer the money each month.

We’re used to setting up payments for accounts and debt repayments, but we seldom take our savings “payment” seriously. You should think of this as another account that you have to pay.

The advantage of transferring the savings amount out to a Savings Pocket immediately is that you cannot be tempted to spend it. You can’t spend what you don’t have (well you can with a credit card but that is a discipline you need to solve for yourself)

Challenge

Work out how much you can save (either actual savings or extra payments towards debt) and set up an automatic payment now to transfer this money. If you’re not sure how to create a budget, read this blog.

Manage your credit card spending

Managing your credit card spend and keeping it within your monthly budget can be a bit tricky. The reason is that we budget for a calendar month, but our credit card statement generally happens at a random mid-month date. My credit card statement cycle is from the 8th of each month to the 8th of the next, but my payment must always be made by the 3rd. Now that’s just confusing!

It would make so much more sense if the statement cycle just ran over a normal month so that we could easily track our spending. But this way, the banks keep us confused and we just keep spending money never really being in control.

Let’s take a closer look at the issue and I’ll show you how to stay in control with just a very simple calculation. It will just take a few minutes of admin and a weekly checkup on your statement to make sure you know what’s happening.

Step 1:

Make sure that you can easily access your statement whenever you want. You can probably do this online, via an app or possibly even some texting service. However you do it, be sure that you’re set up as you will want to check your balance weekly.

Step 2:

Set a few reminders on your phone
1st of every month – check your balance
Set up a monthly reminder to pay your card balance on the same date each month
Set reminders for the 7th, 14th, 21st and 28th to just check-up on your balance (it will soon become a natural habit to do this, but reminders will help in the beginning)

Step 3:

Create a spreadsheet similar to this. My calculations assume that I make a payment near the end of each month, so you must just take into account when you make a payment.

Manage CC — Zoom in if you can’t read the notes

You need to know what the starting balance on your account is. This is how much money you can spend. Then, enter the amount that you budgeted for your credit card spend.

The payment due amount will only be known later in the month, and the real final balance obviously only at the end of the month.

Because my monthly payment happens near the end of the month, my weekly check-points are simply the opening balance less a quarter of my budgeted spending. These figures are just rough estimates to what my account balance should be and if there is a major discrepancy I can always look at the transaction details.

The Predicted Month end balance is the Starting Balance less spending plus the payment made into the account.

All it takes to track your spending is a weekly check-up of your balance to see that you are on track.

Don’t let the banks mid-month statements confuse you, take charge of your money!

Set a short-term goal

Many people avoid setting financial goals as they feel inadequate or they feel that they cannot achieve things and thus shouldn’t set themselves up for disappointment. What nonsense! Setting financial goals is so easy, and achieving them should be easy too. Here is a 5 step guide to setting a stress-free short-term goal.

1. Understand the difference between short and long term goals

Firstly, let’s understand what we mean by a short-term goal. This is something that you want to achieve in less than 12 months. If you need longer than that to achieve your goal you’re hitting the medium-term which I define as more than 1 year but less than 5 years. More than 5 years is what it takes for long-term goals. That’s all rather simple isn’t it?

2. Decide on a short-term idea

Now is the time to think of something you would like to save for within the next 12 months. Jot down a few thoughts such as a weekend away, a spa-treatment (or two), an expensive handbag, or perhaps a road trip. Whatever you’re thinking of should be something special and not something you would ordinarily do.

Car services or new clothes are probably things you have to do anyway over the next 12 months so try think of something that will really make you excited.

Now choose the one item from your list that stands out most to you.

3. Calculate all the costs involved

At this point you need to be realistic about all costs involved in your chosen idea. We’re focusing now on financial costs, but you should also think of time and energy. You may not know exact costs but try to think of an estimate.

If you thought of an overseas trip, be realistic about the costs and be sure that it is something you can achieve within the next 12 months. It may be tough and it may require sacrifices, but it needs to be possible.

4. Look at how you can achieve this idea

Now decide how you are going to achieve this idea. Up to now it’s not yet a goal. In deciding how to achieve this look at how much money you must save each month and decide what you can do to save this money. Think about what bank account you will use for this, or you may decide to save cash. Ask yourself the following:

How will I feel if I achieve this?
How will I feel if I don’t achieve this?
What am I happy to give up in order to make this happen?
How long do I need in order to achieve this?
What can I do right now to start towards this saving?

5. Re-define the idea into a goal

Now that we have thought of an idea and looked at how we can achieve it, let’s write it down as a goal. When creating a goal be sure to write down achievable goals. To say “I want to save enough money for ….” is a bit vague as we could never have “enough”. Put down values and dates and real things that must be done.

An example would be:

“I want to save R4,000 cash within the next 8 months for my weekend trip to the Cederberg. I need to save at least R500 per month and I will do this by doing …… “

Be sure to make this goal something that is achievable; even if it takes hard work. It is completely pointless to set unrealistic and impossible goals. And if you have never really set goals before, start off small and see how rewarding this can be. Have a look at these ideas to help you keep motivated and focussed.

plan

Challenge:

Set yourself one short-term goal today. Spend sufficient time deciding what it will be and how you will achieve it.

Write it down and stick it up somewhere that you will see it every day (e.g. fridge or mirror)

Guilt-free spending

shirts We’ve all experienced feeling a little guilty about buying something. Wouldn’t it be great though if you could go shopping and be guilt-free?

Well it’s possible and the solution is so simple and obvious. In fact, you already know what the solution is, you possibly just don’t want to hear it.

Make and stick to a budget!

That’s it! That really is as simple as it is. Once you have worked out how much money you make and spend each month, you simply need to create a budget. This way you can truly go shopping with no guilty feeling. If you have planned to spend say R2,000 per month on clothes – then go for it! (Don’t worry about the currency or figure, it’s just a example) And if you have been saving for some new expensive device, go and enjoy buying it!

A good way to stick to your budget is to use cash. If you arrive at the shopping centre with a set amount of cash in an envelope (and no bank cards), then you really can’t spend any more than you planned to. You will see how the sales and “must-have” items are suddenly less tempting.

When you are in control of your finances it really is fun to go shopping and to spend money on the things you have planned for and saved for. And buying things within the budget is completely guilt-free as you don’t even need to think about whether you can afford it or not. You have already done that thinking and you know the answer.

Being in control of your money will reduce any stress you have that is related to money. The stress is usually because of lack of knowledge of your situation and feeling out of control. It can be sorted out with just a little effort (well initially it may be a lot of effort!)

REMEMBER: plan, budget, spend