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MOVE to improve your budget

Category Advice

When Government announces the annual Budget Speech, it is also a good time to review your personal household budget and ensure you are still on track.

MOVE TO YOUR GOALS
According to MSP’s Operational Director David Britz, the most important thing when planning one’s finances is to set financial goals. “Financial goals can only be reached when you manage your household according to a monthly budget,” he explains.

“List your and your spouse’s gross income, along with any other income derived for instance from rent, commission, sales, etc., in your budget’s income column. Your expense column is likely to be the one where the most action is. Here you should distinguish between Essential Expenses, including your bond repayments / rent, car repayments or transport costs, insurance policies, debt and credit card repayments, school fees, groceries and retirement and emergency fund savings. Optional Expenses can be variable and include luxuries such as your DSTV subscription, entertainment, clothing, etc. When compiling a budget for the first time, it is useful to keep all your till slips for a month and write down every single cent you’ve spent to see where your money goes.   

“Once you have a realistic picture of how you spend money, you can decide where you should be spending more and where you should be cutting down. In all likelihood, you will find that you can shave off some of your optional expenses and rather contribute that money to an investment, which will bring you closer to reaching your financial goals,” says David.

MOVE TO EQUITY
Financial goals can mean different things for different people. David comments: “An important goal is to save money for a deposit on a house if you are not yet a homeowner. Perhaps you want to have money available to afford your children’s education.

“Home ownership can also give you access to equity, which simply means the value you build up in your asset (home). The difference between the value of your home and your outstanding bond amount, is seen as equity against which you could, for instance, get a loan to afford the things you want,” he explains.

WHY YOUR BUDGET IS A GOOD MOVE

It helps you keep your eyes on your goals

A budget helps you figure out your long-term goals and work towards them. It stops you from spending recklessly on things with no long-term value.

You can retire happily

Retirement planning should start as soon as you start earning an income. Make sure you prioritise retirement savings so that you are not destitute in old age when you can no longer work for an income.

You are prepared for emergencies

Unforeseen emergencies can create havoc in your life. That is why you should provide for an emergency fund in your budget allocation.

It shows you where you spend too much
A budget helps you to look at your financial picture as a whole. It does not matter whether you earn a living wage or a huge salary, everyone benefits from prioritising how he or she spends money.

It keeps you from incurring debt
When your budget clearly shows how much of your hard-earned income goes towards servicing debt on items that are already used and less desirable than when you bought them, you will quickly lose your appetite to incur new debt.


You get a good night’s rest

Few people who follow a budget have worries about their finances. A budget places you in direct control of your money.

MSP provides multi spectrum property solutions. Visit MSP Finance for more details.

Author: Multi Spectrum Property

Submitted 13 Mar 17 / Views 744