The Secret to a Successful Budget
The internet is full of suggestions on how to save money. Ideas like squeezing the last of your toothpaste out, and recycling potato peelings as a tasty soup. These treat the symptoms and not the problem. To save money, we need to spend less of it in the first place.
The Great Consumer Scam
I wish I had a thousand rand for every time I hear an advertisement along the lines of “save R2,000” only to find I have to pay R2,250 first for a hopelessly overpriced product. Consumer commissions in western countries prosecute for less. Corporates in South Africa get away scot-free and avoid punishment.
Sometimes I feel like finding the manager and suggesting, "I’ll take the R2,000. You can keep the goods". I wonder what would happen if I tried that? No prize for guessing. By the way, the phrase “scot free” recalls an American slave who fought for his freedom and got it. I think it is time we fought for consumer freedom in South Africa. If you agree, please let me know!
Save Your First R1,000 This Month
I just mentioned a number to get the conversation going. The same principles apply whether you want to save R100, R10 or R1. You do so by spending less, and this blog is how you go about it. But first, let’s stop by to observe a few principles. By the way, this is not for ninnies. This blog takes no prisoners.
The secret to saving money and getting rich is to put aside a little every month for future needs. After all, what’s the point if you cannot enjoy the benefits of your efforts later? I think the following breakdown is close to a perfect pattern of expenditure:
- 20% on rent, mortgage, home improvements
- 20% on family education
- 15% on pension, medical aid and medical expenses
- 25% on food, clothing and the rest
- 10% on taxis, petrol, car expenses and food at work
- 10% on savings and investment
Of course, this is just an example. Your circumstances may be different but the principles are still the same. You cannot spend everything on food and clothing and survive on government grants. You have to be responsible. If we are lucky, all of us will retire and need a pension of some or other kind one day. Let’s plan that now.
- Change is a long-term process, not a quick fix. Keep a detailed record of where every penny of your money goes. List this on separate pages, using home, education, food and clothing, transport, social insurance and savings as your headings.
- Analyse the results. Don’t be depressed. At least you now know where your money goes. Some 95% of South Africans spend all their income on daily living and expect the government to balance their budgets. What are you going to do when the state kitty dries up? Be grateful if you planned ahead.
- Your next step is to come up with a plan. Don’t feel let down if you can’t match my perfect pattern of expenditure. It is an ideal statement to work towards. You may never get there, but at least you will be moving in the right direction. Your immediate objective is to come up with a budget in which you save 10% every month.
- At the beginning of every month, allocate your resources. Pay your rent / mortgage, pension, medical expenses and education first. These are your guarantee of a better future. Invest your savings in a special bank account. What you have over is your budget for daily living for the month.
- To make ends meet, write each day of the month on a separate envelope, and put your daily allocation in it. Ask the family to gather around and commit to the idea. Let the little ones help fill the envelopes. You are teaching them the value of the money you work so hard for.
Can It Be That Easy?
It’s not easy at all! We live in an imperfect world. From time to time, you may have to borrow from another envelope to pay for something unexpected. My method helps you choose between what is really necessary, and what is nice to have. Countless people live this way. They call it budgeting to come out on what you have.