The festive season is upon us. At this time of the year we tend to allow our expenses to run away from us as we begin to fund festive gifts, feasts and holidays. Most of us are already burdened with debt and can’t really afford to allow our situation to become worse. Now is a good time to pause, take control and reduce that debt burden before it’s too late. Here are a few debt management tools to get you started…
21 June 2013
Most of us assume that we are in control of our finances, balancing a month to month budget with our usual list of debit orders and the same old grocery and electricity bills. But is your money actually working for you?
Before you can begin to make your money work, you need to take an honest look at where it is going. When did you last sit down and work out where you could be saving more, how you could be investing that little bit extra, whether or not you could be getting a better insurance deal?
Are you making it easy for your bank, your service providers, your medical aid, to make money off your apathy and inertia? Well, this is your opportunity to empower yourself and take back control – to ensure that you are getting the best available offerings on the market.
Yes, it takes time and patience, and no-one can do this but you. That friendly man at the bank is not interested in making you rich – he’s interested in selling you a product. This is what Moneybags is here for – to provide you with the necessary guidelines to empower yourself. You can make more money, every month, than you currently do without having to completely change your lifestyle.
This guide provides you the first 10 steps towards getting there. Spring cleaning your finances means taking a careful and systematic look at the way you spend and manage your money. If you implement these practices into you daily life, it will save you thousands of rands each year.
Here’s how to start:
Write an accurate annual budget
There’s no point in only drawing up a monthly budget. Your expenditure changes from month to month, but your income probably doesn’t. What about the car service you’re going to need next month? That December holiday? You need to take each of these expenses into account, looking carefully at all outgoing costs throughout the year. So, if your car service in March cost you R 9000, that’s R 750 that you’ll need to save a month. Make sure you put together a break down of your entire annual expenditure.
Determine your spending patterns
On completion of the annual budget, you’ll discover that you fit into one of two categories: either you spend more than you earn, or you are living within your means.
If you’re spending less than you earn – well done. Now is your time to really maximise your savings.
If you’re spending more than you earn you’ll lose your savings and your debt will continue to grow. If your spending is out of control, don’t be discouraged. This is the starting point to cleaning up your finances. By taking an honest look at the way you are managing your money, you’re already on your way to making it work.
Cut your expenditure
Seeing your budget on paper is often quite a wake-up call, even if you’re living within your means. Perhaps you didn’t realise how much of your income has been spent on bank charges each year, or how the annual cost of that post-work beer could pay off your chemist account.
Here’s your opportunity to make empowering choices.
You may only need to introduce small changes, like taking a packed lunch to work three days a week or cutting back on take away coffee. Or your finances may require a more comprehensive overhaul. Either way, this is your chance to take your finances seriously.
However, if your new budget is completed and you’re still not living within your means, it’s time to make some serious changes. This means changing your lifestyle and purchasing choices, and breaking the habits that have got you to where you are today. Moneybags is full of tips and guides on how to cut expenditure in every area of your life. Check out our Sales and Deals to ensure you’re getting the best price whenever you spend.
And visit our Shopping section for tips on how to save on all your basics.
Pay your debts
The interest on debt is far higher than the interest you earn on your savings. Focus on paying off your debts before you begin to save.
Start by asking yourself where your debt is coming from. Maybe you’re paying off your student loan with a monthly debit order. But is there a way that you could decrease the interest? Pay a little more into the loan account each month with money that might have gone into a low interest savings account?
Take a look at our simple debt guide for more information on how you can repay your debts as quickly and painlessly as possible.
Perhaps you are unable to pinpoint where exactly your debt is coming from. Do you end each month in the negative, without explanation? This means that you are in the habit of spending more than you earn. Take a look at your budget in Step 1 and your savings in Step 3. Then allocate the money saved from Step 3 towards regular debt repayments. And whatever you do, don’t borrow any more.
If you find yourself in a significant amount of debt and unable to afford the minimum repayments, then you need to seek help now. There are services available to assist you. Take a look at our debt guide to help get you back on track, or call IDM Solutions to speak to a certified Debt Counsellor (021 481 1700).
Commit to your budget
Sometimes we can be our own worst enemy. You’ve gone to the effort of re-allocating your annual expenditure, now’s the time to commit to it.
Make a deal with a friend, have a savings goal, budget in a special treat for each milestone. Or, next time you pop down to the deli to buy a gourmet sandwich, add up the annual cost of a weekly slip up.
Get serious about saving
Moneybags has a simple philosophy: wherever you’re spending, you can save. With a bit of research, you’re sure to find the best products for the best prices.
This site contains hundreds of tips and guides on savings and deals. Whether it’s grocery shopping or eating out, we’ve put together the information you need to save.
And keep up to date by subscribing to our weekly newsletter.
Research your contracts
Have you been on the same cell phone contract since you got your first phone? Do you auto-renew your car insurance every year, without looking elsewhere? Are you able to confirm that your medical aid is giving you the best cover available at the most competitive rate?
A lot of us stick to the name we know – out of familiarity or simply to avoid the inconvenience of changing service providers. If you’ve been doing this for some time now, then it’s important to remember two things:
1. There are probably better deals out there.
2. If you change over to the best deal on the market, you will save more money.
As markets become more competitive, plenty of great deals are constantly being launched. Whether it’s your gym membership contract or your medical aid, take the time to research the latest offers available. Find the best deal, and challenge your current service providers to beat them.
If they can’t, it may be time to make that change.
Find out what your bank is charging you
Add up your bank charges – withdrawal costs, swiping fees, interest on credit. You can’t spring clean your finances without spring cleaning your banking. Use comparison tools on sites like Justmoney to research what’s out there.
If you’re not interested in moving banks, pay a visit to your local branch and look carefully at how you can cut your banking costs.
Know your goal
How much should you be saving for that rainy day? Six month’s salary. And if that seems impossible right now, aim for three.
Remember – you’re only ready to save once you’ve cleared your debts, or have implemented a stable debt-repayment plan. And make sure your monthly saving is debited directly off your account and into a high interest savings account the day after pay day.
Go back to your budget
Keep your budget close at hand and refer to it often. It’s important to remain aware of what you are spending and saving. By being pro-active, you can take back control of your finances again.