Take Charge of Your Money

Taking charge of your money has nothing to do with how much you earn or spend, but rather how and where you spend it. And knowing why! It’s being concious of all your financial decisions and realizing that everytime you spend money, you are actually making a decision to do so.

Looking at your spending pattern can show you what you prioritize in life. You may not even know how much you spend on what, but where your money goes is a good indication of what you value. If you find that your money is going to things that you don’t value then it’s a sure sign that you need to take charge and re-align your spending habits!

Taking charge of your money is all about knowing what you are doing with your money, and understanding the consequences of each transaction.

Consider how hard you work for your money, isn’t it silly to just spend it so frivolously?

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!

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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.

 

Have an Emergency fund

It’s always a good idea to have an Emegency Fund available where you can quickly access money. You never know when something is going to happen. Think of how you would cope with a car service which costs 3-times what you expected, or if you needed to be admitted to hospital but your medical insurance requires you to pay upfront. Perhaps your washing machine suddenly stops working, or a power failure causes everything in your freezer to go bad. You could even have your credit card blocked and be in a difficult spot for a few days.

It’s just useful knowing that you have something saved for that rainy day. And, it is a great stress relief knowing that you are sorted for emergencies.

emergency

How much do you need?

Circumstances are different for everyone so you need to make this decision yourself. Think about things that may have happened in the past where you suddenly needed extra money. Also think about things that could happen.

This is certainly not an exact science, rather just a ball-park figure which would make you feel comfortable and less stressed. Having something is better than nothing, so if you really can’t figure out how much to aim for, just set a low limit and see how it goes.

Type of account?

The three important factors about the account you use for this Emergency Fund are:

The purpose of an Emergency Fund is that you can access the money immediately. Anytime, day-or-night. Imagine needing to draw cash at at ATM at 2am – would you be able do so? Even if it involved using your online banking to transfer money between accounts; as long as it can be done quickly.

If you have a home loan from a bank, it could be very helpful to stash this extra cash in that account. Provided of course that the home loan account allows for withdrawals or transfers. Doing this would allow you to save interest on your debt, and this is often high. If you’re not sure contact your financial institution.

Have you considered keeping all your savings in one account and simply tracking the various goals in a spreadsheet? Have a look at how to use Savings Pockets to simplify your life.

How to start?

The best way to start anything is just to start! You don’t need to have enough money or know exactly what you’re doing before you start; just make the conscious decision. A few guidelines though would be:-

  1. Decide on your number. How much would you like to have saved in this fund?
  2. Decide which bank account to save it in – investigate the options but remember to keep your life (and admin) as simple as possible.
  3. Create a budget if you haven’t already.
  4. Set yourself a goal to save the necessary funds.

Once you have started you will see that circumstances may change, or you may need to use your fund sooner than expected. That is all fine, just relook at this often and be sure to be working towards this.

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!

Budget by payment forms

As with your simple budget, there is no generic solution to understanding how you spend your money. We all have different spending habits and ways that we understand our money.

Something I find useful though is to know how much money is spent via automatic payments from my account, how much money I spend as Cash, and how much on my Credit Card. You of course may have multiple credit cards or store cards and if that’s the case it will be very difficult (if not impossible) to budget spending per card. If you have multiple cards then you really need to ask yourself whether you need them all, and if not, start cancelling them. One tip I can give with absolute confidence is that if you want to be in control of your money, you need to keep things simple!

Basic Budget 2

In this example I have simply indicated which categories are paid via Automated Electronic payment, by Cash & by my single Credit Card. In reality, your spending will never be exact, and unplanned things happen. That is fine, as long as you know what your plan is, and can identify where and why things have changed.

The advantage with categorizing spending by type is that you can actually draw the cash you need for the month upfront and you can also keep track of your credit card expenses as you know what is budgeted for your card. When doing this exercise though, have a look at the advantages of using cash and consider using cash for more of your spending.

This is just another way to understand what you are spending money on, and how. Take this concept and make it work for you with your specific circumstances.

As always, take charge of your money!

 

Create a simple budget

If you’ve never made a budget before then you should really start with something simple. Not that you ever really have to get too complex, but as you work with a budget over time you may find things that you want to change or situations that don’t work easily with your budget.

Before starting it would be good to know how much you’re currently spending. If you don’t have a clue then take the 30 Day Challenge of keeping track of each and every expense.

I like to use a spreadsheet for my budgeting as it makes the maths easy; you can however use any tool including a notepad and pen.

Start off with your income. You should hopefully know how much you earn each month, but if not, go find your salary slip. I would use my “net salary” (the money that is actually paid into my account) as my income as there is nothing I can do about taxes and other deductions off my salary. Of course, you may have access to a company store or canteen where purchases are automatically deducted off your salary – and these expenses you have full control over. So, use your full salary less taxes less compulsory expenses that you don’t control. (You can use your gross salary and show taxes on your budget, but that depends if you want that kind of detail)

If you have any other stable income (that you can rely on) then add it in as well. Examples would be over-time that you always work, rental income or a personal loan that someone is paying back.

With the Income section completed, now it’s time for the hard work. You need to categorize your spending into categories that make sense to you. Everyone has different spending habits and there is no “one fits all” solution. Categories could be things such as:

  • Satellite TV
  • School fees
  • Loans
  • Insurance
  • Groceries
  • Eating out
  • Entertainment
  • Fuel
  • Telephone
  • Club memberships
  • Golf
  • Other (for small things that don’t fit into a category of their own)
  • etc….

Although most expenses are monthly, some may be annual expenses (e.g. club membership) or possibly even quarterly expenses. The best way to handle these is to work out the monthly amount and budget per month and save the money in a specific savings pocket so that you don’t get a shock when you need to pay the money. It’s really easy to do once you’ve set up your “system” and reminders on your phone.

The most important aim of a budget is to ensure that you earn more than you spend! If you don’t, then you have to spend less. It’s that simple, but in practice it may take a few months to change your spending habits. You may want to consider cancelling store cards as these make spending far too easy!

Basic Budget

Now that you have decided how much you can spend in each category, you must stick to the budget! You will find that you cannot control expenses exactly as you plan as things happen and we react accordingly. However, if you overspend on the Groceries category then you need to underspend somewhere else to ensure that your overall expenses do not exceed the budget.

I also like to have a category for “Other” expenses which are often unplanned things that come up.

Once you have created your budget, see if you can find any extra cash or ways to save money.

Challenge

Create your budget now!

Guilt-free spending

shirtsWe’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