It’s January and we are all feeling the pinch of our spending over the Festive Season. How do we bounce back so as to get our finances on track again?
January is always a long month, especially for us at entrepreneurs. Business is often quiet over the Festive Season, so January becomes a really tough month for us all. But, let’s face it, this happens every year, so when are we going to learn from this😊? Why not pre-empt this problem, because, guess what, the same is going to happen in a year’s time again!
Save a small amount each month during the year into a ‘January kitty’, and you can use this for your expenses next January.
Well that’s a great idea for January 2020, but what are we going to do now to alleviate the pressure this January?
There are a number of ways to consider reducing your expenses. Some will suit you, others might not be practical for you personally, but consider them all:
- Use public transport – this can save on fuel cost
- Sell a vehicle – if it is rarely used, sell it to save on financing costs and insurance
- Carpool – if you can travel to work with others, you can save on costs
- Ensure that your tires are correctly inflated on your car – this saves at least 1% of your fuel costs, and helps your tires to last longer.
- Consolidate debt to an institution that offers you a reduced interested rate
- Go to your bank and ask for a reduction in the interest rate on your credit card or home loan.
- Sell unused items. Look through your cupboards – we all have items that we don’t use and can get some cash for them.
- Reduce the temperature of the water in your hot water geyser – after all it is summer now and we do not need such hot water. This will save on electricity bills.
- Update your home/business with LED light bulbs – yes, there is the initial outlay, but they are more energy efficient.
- Cancel club and gym memberships if you are not making good use of them.
- Cancel DSTV
- Cancel newspaper and magazine subscriptions
- Cook your own meals at home
- Take leftovers for lunch at work – this saves an incredible amount!
- Buy non-perishable food in bulk
- Short term insurance – shop around for the best deal and ensure that your valuables are not over-insured, or under-insured
- Life assurance – if you are paying for life assurance to cover your home loan, ensure that the benefit value is in line with the value of your home loan, and is coming down as your home loan is paid off.
- Reduce your children’s extra mural activity to one per child – they don’t need to do every activity that is offered – it teaches them nothing financially to allow this.
- Don’t allow yourself to buy clothes for the next 6 months until you have built up a special ‘clothing kitty’.
- Grooming – reduce the number of times you have your hair or nails done. Oh, yes, this is a hard one for us girls!
Some of them are tough ideas, and others are ‘why didn’t we do this earlier’ ideas!
But one of the fundamental principals with financial planning is to know where your money is going, and then only way to do this is to monitor your income versus your expenses. Setting up a budget can be really tedious even though we know it is necessary. Can you give us a simple method to set up a budget?
Well, there are many budgeting programs online which you can use, but if you are really wanting to keep it simple, it just requires a pen and paper. I, personally, use an Excel spreadsheet for my budget.
At the top of the page, write: Income. And there you write down whatever income you have. That’s your business profits or the salary that you take out your business, and maybe it could be something else like rental from a granny flat that you rent out. The point is, it is any money you receive during the month. Add the amounts up so that you get a total.
And then you write: Expenses. Now when it comes to expenses you need to write down everything. So that means expenses such as: your home loan or rent, electricity, insurance food, petrol, school fees, tithing/or giving, medical aid, birthday gifts, retirement savings, other savings, life assurance and some savings into an emergency fund. Absolutely everything! Don’t miss out anything. In fact, I would add a column for miscellaneous, because there is bound to be the odd thing that you don’t normally pay, which suddenly you need to pay.
And now for the crunch: The Income needs to be more than the Expenses!
If your income is lower than your expenses, you need to go back to the drawing board and see where it is that you can cut back on expenses. And in addition, there needs to be margin. So there needs to be a little bit extra, so that you don’t spend down to the last cent, as we all know how unexpected expenses just creep in!
It can be really tough. But at least when you have a budget you know where your money is going.
Absolutely! Keeping a record of your expenses is essential to ensure that you know where your money is going.
How do we keep track of our money?
Once a week, sit down with your finances and make a note of all the expenses that you had in the past week.
If you always use just one bank account and you do not use much in the way of cash, then take the information from your bank account statement and you will be able to see where you have spent it. Most internet banking websites allow you to down load the statement into Excel.
There are apps to use for this, but if you are anything like me, the easiest is an Excel spreadsheet. The point is, find the easiest way for you to keep track of what you are spending. For without this information, you will not know where to start in order to reduce your expenses.
Best wishes, as your journey through January, and I know that you’ll be back on your feet in February!
As a Senior Financial Planner at Core Wealth, Kirsty brings to her clients a refreshing feminine outlook on financial planning in what is traditionally thought to be a male-dominated world. Her priorities are to Protect, Organise, and Grow Your Wealth.
She completed her Post Grad qualification at the University of Stellenbosch and joined Core Wealth 6 years ago as a Certified Financial Planner.
At Core Wealth, we pride ourselves in our Independence which allows us to offer Personal Financial Solutions in all spheres of financial advice. We are only able to achieve this through our highly Qualified staff.
In addition to her responsibilities at Core Wealth, Kirsty is a Board Director of the Financial Planning Institute of Southern Africa where she is Chairperson of both the Advocacy Committee and the Remunerations Committee. This gives her the opportunity to influence decisions made both by National Treasury and the Financial Sector Conduct Authority (FSCA).
For those of you who are up late at night, you may well have heard Kirsty on air as she presents financial insights on Cape Talk radio at 11.30pm on Tuesday nights. This work with the media has recently earned her the esteemed FPI Media Award for the South African financial planner who has had the most influence over the South African public through the media in the past year.
In 2017, Kirsty was a finalist in the Business Women’s Association of South Africa, Regional Business Achiever Awards.