Smart money management is an important component of developing a sound financial life and future, especially in volatile economic times such as these. Now is a great time to focus on spending smart. For example: A credit card with a balance of R20,000 with monthly fees of R50 and an interest rate of 22% (R4,400 per annum) will cost R5,000 per annum in fees and charges. If you put the R20,000 into a savings account you will be accruing approximately R1,200 per annum interest. The smart way to manage your money would be to pay off your credit card first due to the higher interest rate charged, therefore saving you R3,800 per year. Budgeting Implementing a budget is an excellent way to control your spending habits. A budget is nothing more than a written plan for how you intend to spend your money each month. How much you'll contribute to savings and retirement and so on. A budget helps you live within your means. When you're drowning in debt, it's your financial life raft. Over time, if you stick to your budget and follow the rest of the advice we are providing, your financial situation will improve. But even after your financial situation is looking better, you should continue to manage your money by using a budget. Otherwise, you may get careless about your spending or begin using credit too much, and the amount of your debt may begin creeping up to dangerous levels again. Living on a budget will also make it easier to: -Build up your savings so you have money to fall back on if you are hit with a big unexpected expense, lose your job, or have to take a pay cut. - Purchase big-ticket items with minimal use of credit - Help make your family's financial dreams come true - a new home, holiday, education for your children, a comfortable retirement. Comparing Your Monthly Spending and Income Creating a monthly budget for your household is not a complicated process, but it can be time consuming. Simply stated, here's what you need to do: -Compare your current total spending to your current total income and check this on a regular basis. -Reduce your spending as necessary so it's less than your income -Allocate your money appropriately so you are able to pay all your living expenses and debts. Get the family involved By being open and honest with your family about your financial situation, you will not only feel relieved that the load is shared, you will also give them a better understanding making it easier for them to accept the changes that need to be made. Sit down as a family and talk about why your family needs to live on a budget. Share with your kids your income and expenses, let them know how much less your family needs to spend each month. Ask your kids for budget cutting ideas, including things they are willing to give up. Also, discuss any budget cuts you plan to make that will directly affect them. Cut spending and make more money If your monthly expenses are greater than your income, it is definitely time to clamp down on your spending - AND stop using your credit card! This also applies if you are barely getting by each month and paying the minimum on your credit cards... as well as putting a little or nothing into your savings. One of the keys is to always settle your debt first, as these attract far higher interest and charges than you will receive in a bank account. Once the debt is settled, the money that was being allocated to these debts can now be used for saving and make sure you put this into a high interest call account. Contact DebtBusters for further advice on 0869 99 06 06 or take a look at our website www.debtbusters.co.za.
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