Old Mutual – Budgeting Tips
The average person spends 12 years in school, and many learners go on to spend another three or more years studying at university. The aim of all of this formal education is to equip us with the skills needed to earn a salary or wage – so that we can make a living. You might think then that at least some of the classes taught in school would also help us manage our finances.
But no, we leave school equipped only with the skills needed to make money and not those needed to actually manage it. It comes as no surprise then that budgeting and stretching one’s finances is a challenge for many people. But fret not. Here, Old Mutual brings you several top tips to help you budget and save.
Have clear objectives
Saving for the sake of saving is difficult. Without real goals it’s hard to muster the self-discipline needed to keep up the habit. Think hard about your reasons for wanting to put money away. Is it to build an emergency fund, to put a deposit on a house, or to get out of debt. Once you’ve made these priorities, you’ll find it much easier to commit to your budget. If you ever find yourself being tempted by unplanned and nonessentials expenses, just remind yourself of your goals.
Prioritise
Setting your goals is an essential first step to saving. With those in place, you then need to ensure that you have a strategic plan to meet them. List all the expenses that you need to pay for over a month (Here it helps to look at a bank statement) and divide them into two columns: essentials and nonessentials. And be honest about what’s essential. Essentials go into your budget first. Then you prioritise your non-essentials. If you want to save, some will have to go. Also bear in mind that you should work in a contingency fund for small unexpected expenses.
Document everything
The best way to keep track of your spending and savings is to either document them in a spreadsheet or use an app like 22seven, which will automatically track online purchases and swipes. When you have a proper idea of what you are spending, you can both see how well you are sticking to your budget (and make adjustments where necessary) and identify areas in which you can save. It’s quite possible that there are a few unnecessary debit orders coming off your account, or maybe certain little luxury adds up to a considerable sum when it becomes a habit.
Automate your savings
Make a habit of transferring money into a savings account when your salary comes in. If it’s beyond your self-discipline capabilities or it just seems like too much admin, you can simply automate the process. Set your savings as a debit order to go off soon after your salary is deposited. That way designated savings are put away before you can spend them and you learn to get by with what’s left in your account.
Save for emergencies
Separate from your new goal-orientated savings plan, you should also be putting money away into a separate bank account (where your money can be accessed in a hurry if need be) reserved solely for emergencies. While the thought of having to put money aside on top of your savings may be daunting now, you’ll thank yourself later when you need to buy a new gearbox and realise that it won’t affect your savings or prompt you to take a loan. To learn more about how to create a rainy-day fund, read this article on emergency funds.
Time your debit orders wisely
The wisest (and sometimes kindest) thing you can do for yourself is to get your debit orders taken off as soon as your salary is deposited. Planning them for the day after payday is probably not a good idea (some companies pay late or change their date of payment). But setting them up for the third of the month is usually a good idea, as it gives you enough time to ensure your salary is in your bank account, but so much time that you can squander your money. Don’t default on your payments – this will hurt your credit record, and you’ll have to face extra charges as a penalty.
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For more useful money-related tips, sign up for the Old Mutual Money Mailer. In this free monthly newsletter, you’ll find articles on topics ranging from borrowing to saving and everything in between. If you’ve ever wanted to know how to save for university, how to choose a second hand car, or how to improve your credit score, the insights in these articles can leave you wiser, wealthier, and better equipped to make the most of your money.
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