Yesterday a client of mine dropped me an email and it made me remember what made me decide to be a financial planner.
In the quite of my day I remembered that my first promise was to share that which I learn and educate all the people God will allow me to come into contact with.
Today I have decided to go back to basics and ask you the question ” Are you aware of your financial situation”?
Do not answer just yet.
Please give it some real thought.
Yes it is important for you to know what happens to the money you earn or receive on a monthly basis and to have a plan to ensure that you can meet all your financial commitments.
Most people have to make financial decisions every day and realize too late that they need advice and guidance on their personal financial management.
Getting financially fit is normally a process and for this reason a proactive rather than reactive process achieves the best results.
When you understand your financial lifestyle you are in a better position to make responsible decisions.
Budgeting can assist you in understanding your financial position and making sound financial decisions.
Your budget is a list of your total income and your total expenses during a determined period, i.e. a month. It is not only a plan of how you will spend your money, it is also a record of how you have spent your money over the month. A budget will give you a sense of financial responsibility and help you identify what your priorities are when it comes to spending your income.
It will help you to:
- Tackle your debts systematically
- Control your spending
- Determine how much debt you can afford and
- Build wealth
Follow the steps below to draw up your monthly budget
Step 1
List your expenses
Fixed expenses: home loan/rent, car repayment, loan repayment, insurance, fees, etc
Variable expenses: electricity and water bill, food, petrol/transport, other bills, etc.
Discretionary expenses: annual amounts like TV license, car service, school fees, etc
Step 2
Work out a spending limit for each expense category : see below
Step 3
List your income
Step 4
Set your savings goals for the future
Short term goals: getting out of debt, paying for an upcoming vacation
Medium term goals: University tuition for your children, extravagant vacation, paying off your bond
Long term goals: retirement and estate plans
Step 5
Draw up a budget with the information from steps 1 to 4
Step 6
Compare your actual expenses to your budget at the end of each month and take corrective action if you overspent
Draw up your budget Monthly budget template Rules for correct and effective budgeting
Keep your budget realistic
Live within your means. Don’t use a bonus to supplement your standard of living
Get your priorities right, distinguish between ‘needs’ and ‘wants’
Budget for a surplus, leave a margin of at least 5%
Involve your family
Create an emergency fund, put some savings aside to protect you in case of an emergency
Revisit your budget on a monthly basis
There is talk of an economic recovery in sight and the only thing that is going to help us not sink to this level again, is for you and I, to be very aware of where we are today financially and using these basic steps to map our way to where we pray to be.
I end my note to you, with these few words;
“We are products of our actions so let us decide to push forward and cultivate the actions that will lead us closer to our end goals”.
Ebo Quagraine
Ebo Quagraine 