Manage My Money is a mini series looking at ways in which to budget and save through investing in an Emergency Fund or Unit Trust.
Saving, like many other ideas, is easier said than done. We often plan to save but very rarely stick to the plan.
I’m sure many of us have had the thought, “I really want to start saving every month… next month I will start” and when that due date approaches, the money we intended to save seems to disappear on sales, food and entertainment.
We find ourselves postponing the savings plan to next month and then the months turn into years. We need to start saving before we spend rather than save after spending.
HOW DO YOU MANAGE MONEY?
Most people manage their money through budgeting but it can also scare some people as they don’t understand or know how to budget or where to start.
At Growmatter we refer to budgeting as Money Management. Money Management is proactive, requires planning and it is an ongoing process. A good, realistic budget that you can commit to, is the first step to managing your money.
Money Management will help you find a balance between income and expenses, showing how much you have available to put into savings. It also helps you see unnecessary overspending.
In our articles Money Management 101 and Money Management “Boxes” we provide information on how to break down a budget so that it makes sense.
Ideally, you should try to save at least 20% of your income. As cliché as it is, every little penny really does add up; especially when it’s paired with compound interest (interest earn from interest.)
As retirement approaches, the dream for most is to live comfortably and maybe even travel. The sooner one begins to save for retirement, the more realistic the retirement dream becomes.
REDUCE YOUR DEBT
You should minimize the amount of debt you have.
Investing for the future and also paying debt in the future does not make financial sense. To choose investing over paying off your debt, means the interest you receive from investing is greater than the interest you are paying on the debts.
If this is not the case, you should look to pay off your debts as quickly as possible. It is best to start with the high-interest debts. You do not want to be spending money that you do not have.
WHERE DO I PUT MY MONEY?
How much of your money should sit in your bank account?
Money in your current account could be referred to as dormant money. It is not growing more than inflation and you are paying bank charges on top of that.
If it is in a savings account, the interest banks offer on the money does not beat inflation. Overtime money does not grow in value. It is always important to determine the interest that is offered by the platform you decide to invest in.
It is difficult to know where to put your money looking at the current economic conditions in South Africa. Is it safe to keep the money in South Africa? Should I rather invest offshore? Which financial instruments are less risky?
There are many investment vehicles available depending on your goals and timeline.
Financial Advisers do thorough research on which unit trusts or funds are best suited for you based on the time period you are looking to invest and also the type of growth you would like.
It is important that your investment plan aligns with your goals.
Over the next few articles, we will be looking more closely at savings and investments to help give you a basic foundation.
FAQ's
This is a process of monitoring your saving and spending habits. It is ongoing and requires us to constantly be challenging the way we think and work with our money.
We couldn’t have said it better than this quote we found, “Money management is all about spending intelligently and saving even more intelligently”
In order to achieve your goals and get to where you are going you need to have a plan and know where you are going.
It may seem obvious but no one achieved their goals without having a plan.
Tip 1 – Save before you spend rather than spend before you save.
Tip 2 – Never spend money before you earned it.
Tip 3 – Limit your expenses to 50% of your income. Save at least 20% for retirement and use 30% for all wants.
