Beating The Budget

Quite recently I have had a few friends discuss budgets and budgeting with me. I am not a financial advisor but given my level of financial security I am often asked to help people manage their way out of debt. Of course, the simplest approach to life would to not get into debt in the first place, but this is not always possible. As a blogger, my hobby is quite expensive. We do eat what I make which is a bonus, but the recipes sometimes call for ingredients that are unusual. Dave races single seaters. His hobby is also expensive. These hobbies can only take place if we have the disposable income to spend on them. I hope some of my methods for financial security and beating the budget help.

  1. The concept of pay me first is something I have adhered to for as long as I have earned an income. The school of thought is that you pay yourself 10% of your income. This money is set aside in an account for rainy days, holidays, or a long term savings plan. Do not pay yourself first if you are in debt. Pay off your debt before you save – the interest rates you are charged for money owed will always be higher than that for money saved.
  2. As early as possible invest in a long term fund. I have a retirement annuity fund but unit trusts or something similar will be as good. This is money for your retirement, and it is never too soon to start saving.
  3. Get onto the property ladder as soon as possible. Your capital investment will never decrease over the long term. Keep in mind that the home you live in is not an asset. But your bond repayments will end up costing you less than rental payments on the same property. To make sure your capital investment is secure, keep up the maintenance on your property. It used to be that you could double your money in 5 years, but this depends on the economy. Start of small and aim to grow with your needs.
  4. Having a bond for a house, or a hire purchase for a car is OK! The best advice I was ever given was to not buy anything I could not afford. For example, if you work out how much it would cost you to buy a bed on HP you would see that just saving up the money for less than the time it would take you to pay off the HP will get you the bed, interest free.
  5. If you are in debt then work out how to pay it off as quickly as possible. Any disposable income should go towards this. If you owe more than one institution money pay off a small amount on each debt every month. See who charges you the most interest and pay that amount off as soon as you can. Do not be tempted to consolidate your debt with a short term, high interest loan and if in doubt, consult a financial consultant at your bank.
  6. In South Africa it is vital to have some sort of medical plan. I would recommend a hospital plan over a medical aid any day, but the ultimate choice should be something that suits you, and your budget.
  7. Over and above this, you need insurance for your home and car. I know very few people who can self insure and a car accident could end up crippling you financially!
  8. Now, create a spreadsheet. Input all your fixed expenses in one column, and your income into another. Take your income less your expenses and this is your disposable income. This is what you have to spend each month, and not a penny more! This way, you will not need to access the budget facility on your credit card, or buy on credit. Daily essentials should be paid for with money you have, and not with money you can borrow.
  9. When money was tight, I used to take my disposable income and divide it by 4. Each week I would spend only that amount on our groceries. If there was anything left over, I did not carry it over to the next week. Rather, I spent that on getting a massage, something that was a luxury for me at that time, no matter how much I needed one.
  10. My top tip: be in control of your money and do not let money control you!

What is your top tip to beat the budget, and what if any questions do you have that I did not cover here?

Disclosure: I am not a financial advisor and this advice is given from my own personal perspective and I will not be held liable for any issues that arise from you following this advice. This you do so at your own risk.

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30 thoughts on “Beating The Budget

  1. Always ask yourself Do you need it to do you want it? There is a huge difference between these two things. I’ve tried to teach my children to really think about whether a purchase will change their lives in the long run or is it a fleeting fancy.

  2. This is something I have been working on over the last couple of months and I think I am starting to see results.
    The best thing I did was use our tax return to pay off the credit card IN TOTAL. While it wasnt a substantial part of our debt – that would be the mortgages and student loan it was the one with the highest interest rate so I was overjoyed to see it gone.
    It also helps to have both partners on board if you are in a relationship and share the income. This one is proving to be a bit more of a struggle as I am keen to pay down everything while hubby thinks inviting colleagues to stay for a few nights wont hurt the budget!

    1. Ouch, a few nights of house guests can kill the budget! Great advice to use your tax return to pay off your credit card 🙂

  3. I used to be so good with my budget and create a spreadsheet every month and put in EVERY single expense. Now I’m too lazy. 😛 But, I feel like September is a new month for resolutions, so after reading your post, I am going to give it another go. These are GREAT tips! 🙂

  4. Great post Tandy. Loads of good advice there. I do the same with my grocery budget but I never manage to have any money left over. Food is so expensive these days!

  5. Great sound advice. I am not familiar with this type of medical insurance you have in South Africa. What do you mean by hospital insurance vs medical aid? Do you not get both preventative and also hospital care on your insurance plan? Can you please explain what you mean by this? Thanks, BAM

  6. Tandy, this is so interesting! My top tip is just keep hammering your debts. First, my husband and I paid off our student loan debt, and my was like 27k so that was quite an achievement. I bought only one nice suit for work and go used clothing at the Salvation Army to fill in the gaps. I drove a 13 year old car (and we still have a 16 year old mini van we drive around, but hey, it works). We also tithe 10% to our church, this has taught us so much about discipline and the importance of budgeting. Being generous somehow has increased how much $$ we have, not the opposite. Next, we hope to pay off the mortgage early!!

  7. These are GREAT tips. The.Boy and I are going to have larger rent bills once we move, and we definitely need some budgeting tips!

  8. Tandy, this is really great advice! My big tip is this: work on your relationship. Nothing is as expensive as divorce! I’ve seen several friends’ finances set back decades by it.

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