Make a roadmap for your money
A money plan, also known as a budget, is the roadmap that directs your financial decisions each month. Our daily spending habits don’t always reflect our big goals and dreams. But, if we don’t plan our spending and our saving, we simply won’t get where we want to be.
Your money plan doesn’t need to be complicated, and it should evolve and change as your life does. It should include:
- What you earn
- What you spend (including all debt repayments)
- What you save
What you earn
Start with your income. Only include your predictable income, so for example, don’t budget for a performance bonus until you know it's guaranteed. If you earn commission, or a portion of your income always comes from overtime, use a realistic average based on what you've earned over the last 6 months.
What you spend
To create a realistic spending plan, you need to list exactly what you're currently spending. Work through your bank, credit card and store card statements. Ideally, you would also review your receipts for full details of what you spent your money on. If you struggle to keep receipts, get into the habit of using your phone to take a photo of your receipts as soon as you get home, to help track your spending better.
Now, using your statements, group your spending into categories, like ‘takeaways’, ‘groceries, ‘rent/bond payments’, ‘electricity’ and so on. For expenses that change each month, like the amount that you spend on food, work out how much you’ve spent over the last 3 months and then divide that amount by 3. This will give you a good estimate of your monthly spending in this category. Remember to also include all of your debt repayments as part of your monthly expenses.
Once you have all your expenses categorised and totalled, add them all together and subtract the total amount you spend each month from your monthly income. If you're left with a negative amount, you're spending more than you earn each month, and you need to change this quickly. If you have a positive amount, this is the money you're currently able to save towards reaching your goals and building your future.
So, if for example your income is R12 000 each month, the 2 scenarios could look as follows:
Income: R12 000
Minus expenses: R13 500
Money left over: – R1 500
In this scenario, you’re spending R1 500 MORE than you earn each month. By using credit to cover some of your expenses, you are getting a little more into debt each month rather than building the future you want.
Income: R12 000
Minus expenses: R10 500
Money left over: R1 500
In this scenario, because your expense are LESS than you earn, you can use R1 500 each month to save towards reaching your goals.
What you save
Include how much you're currently saving towards your goals.
Now that you have a complete picture of your current monthly income, spending and saving, you can plan how you’re going to save more by spending less.
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