Nowadays, making a transaction can feel somewhat unreal. Just a swipe and a glance at the number displayed on a digital screen. Whilst this seems easy and practical, it poses a big problem that is too-often overlooked.

When we stop dealing with physical coins and notes - a mental disconnect occurs between the digital numbers and what they actually mean to you in terms of how much money you have just spent, and how much you have left.

This is all the more reason to keep a budget - or a spending plan. Here are some budgeting tips to help you along your way:

• You need to start by making a list of what you spend. Many of us know when we’re not doing well financially, but hide from the uncomfortable reality until we are forced to face it.
• First, write down your fixed expenses: rent, bond instalments, union membership fees, insurance premiums etc.
• Next, list variable expenses: food, transport, rates, cellphone, entertainment and clothing. (Don’t underestimate costs, you will only be sabotaging your own efforts.)
• Now a slightly tricky one, you will need to list irregular expenses: car maintenance, home repairs and so on. Try to work out an average monthly spend. (Again, it’s better to overestimate than to come up short.)
• Finally, you need to add together all of your cost estimates. If the total is more than your earnings, you will need to make some changes. At least now that you know exactly where you are with your spending habits, you’re already in a financially stronger position!

Now to get back in the black!

• List your expenses in order of importance. Some expenses you obviously cannot live without: accommodation, transport and food. But consider whether you can reduce some of your other costs, such as entertainment and clothing.
• Now use the money that you’ve freed up from your budget to immediately start servicing your debt, especially store and credit card debts.

What’s next?

• Once you’re debt free you should establish a basic emergency fund for unexpected expenses. A month’s salary is a good start and it will give you a real sense of security once you have it stashed away.
• You should also try to invest some money each month into your financial goals and investments, like saving for your retirement and your children’s education. This excludes your employer’s pension scheme or your own retirement investments.

Need some help drawing up a budget? Let’s get in touch!

Saving in your thirties becomes increasingly difficult as your financial responsibilities increase. However, sound financial decisions during this phase of life can have profound benefits at a later stage.

Here are some common financial mistakes to avoid:

• The first is failing to draw up a budget. A proper budget is the starting point of all financial discipline and should be physically written down for later reference. Include your partner in this process as it is important to ensure that you are both on the same page.

• The second mistake is do too much too soon. Before investing you need to have accumulated enough savings. It is vital to have an emergency fund, which must have sufficient reserves to cover at least a couple months worth of expenses. This should protect you from a debt spiral in the case of an emergency.

• The third mistake is accruing bad debt. A loan to buy a house is considered “good” debt. Bad debt is using credit to finance furniture, electronics, appliances, vehicles and other items that devalue over time.

• At the age of 30 retirement may seem like it is still a long way off, but it is important to start contributing to your employer’s pension fund or a retirement annuity. You should try to contribute at least 15% of your gross monthly salary, there are significant tax benefits to such a strategy.

• It can be easy to fall under the illusion that bad things only happen to other people. Make sure you have adequate life insurance, dread disease, disability and medical cover.

• Another common blunder is to contend that wills are only for the elderly. Draft a will, review it regularly and don’t forget to tell your loved ones where to find it.

• Life insurance is important if you have dependents. It is imperative to ensure your dependents will be in a position to maintain their current standard of living if you pass away. Determine the exact amount of life insurance you need and review your cover regularly as your financial needs change
  

• Finally, at this stage of your life, you still have a long way to go to retirement and are in a position to take on more equity exposure. It is essential to get proper advice with regards to your investment decisions.

Need some assistance? Let’s get in touch!

Source: www.moneyweb.co.za

Certain provinces have been struggling to keep up with the skyrocketing cost of food. Current data points to an agriculture industry that is struggling, mainly due to the diminished buying power of the rand and a prolonged drought.

November 2015 saw the worst drought in South Africa in 23 years. During this time Stats SA released figures showing three consecutive quarters of steep decline in agricultural activity, forcing South Africa to import maize to make up for the shortfall. With the rand also being in decline the price of imports has risen, drastically inflating the cost of food.

According to Stats SA, grain-based products account for 4.8% of total spending for the average South African household. In rural areas, this figure rises to 10.8% of total spending. Households that depend on grain-based products as a staple dietary supplement, as well as households that are already struggling to pay for food, are likely to be the most affected. This is just in relation to grain-based products, the cost of all food is on the rise and it’s predicted to keep going up.

The Pietermaritzburg Agency for Community Social Action (Pacsa) tracks the inflation on 36 basic food items purchased by lower-income households. The cost of a food basket in January had increased by 9% compared to three months prior.

Between the months of December 2015 and February 2016, general food prices have increased at eight times the rate than they have over the past year. This is, in part, due to retailers increasing prices to protect their profit margins in lieu of the weakened rand.

Make some extra room in your budget to compensate for the increased food prices (and stock up on soup for winter, no pun intended). With the rand being what it is we may all have to prepare to forego some luxuries.

In need of financial advice? Let’s get in touch!

South Africa’s weakened Rand is bound to have a negative rippling effect on our economy. The cost of food, electricity, water and imported goods are all set to rise. Now is as best a time as any to take secure control of your finances.

Budget
According to the National Credit Regulator (NCR), as at June 2015 a shocking 11 million out of more than 23 million credit active consumers had impaired credit records or had failed to make debt repayments. Many South Africans lack basic financial awareness and therefore continue to spend beyond their means.

Drafting a budget is the first and most important step towards financial awareness. It allows you to make realistic decisions with an honest approach based on facts rather than assumptions.

A budget will reveal any reckless spending or debt creation. You should look for luxuries that you can live without: cut up unnecessary credit cards, close store accounts, cancel subscriptions, etc.

Prioritise debts
Towards the end of 2015, the South African Reserve Bank (SARB) raised the interest rate by 0.25%. As a result the prime lending rate increased to 9.75% and debt has become more expensive. Economists anticipate a further increase this year.

Paying off debts should be your next priority as budgets are already being stretched thin.
You should compile a list of your debts in order of most expensive (high interest) to least expensive. Then make minimum repayments on the debts with lower interest rates and put extra money towards the debts at the top of the list.

It does not make financial sense to increase your investments while you have substantial debts, as the interest you will be paying on your debts may outweigh the interest you can earn on your investment.

Forward planning
Having clear-cut and long-term goals will help you stay focussed and determined. Saving for a house, retirement or your child’s education gives your saving a purpose. You can then look into specific investment products that are suited for your financial journey.

It also helps to automate your savings and investments to occur when you receive your salary rather than attempting to save what is left at the end of the month. We are headed for some trying economic times making people vulnerable to poor financial decision making.

The future may seem difficult, but with a solid support structure and firm plans for the future we can overcome any obstacle!

In need of financial advice? I can help you out. Let’s get in touch!

Source: fin24.com

During this time of the year most of our budgets are understandably depleted, with schools going back in two weeks, we should be mindful of back-to-school expenses that are around the corner.

This also affords a great opportunity to chat with your kids about the costs associated with their schooling needs. Involving your children not only helps them understand how much time and effort you put into shopping for them, but it sets them up with good budgeting habits for the future and hopefully, an appreciation for their stationery and uniforms!

Using a whiteboard will provide a more fun and visual way to get your children interested. It also allows for things to easily be added and removed. Write the overall back-to-school budget amount at the top of the board and then create two columns, one for needs and the other for wants.

Check your child’s stationery and book list to see if items can be re-used from the current school year or whether items can be used from older siblings who no longer require them. (The same applies to school uniforms.)

You and the kids can research together and compare prices online and in the malls to determine how much the items they need or want would cost, sourcing the best possible deals. If your child would rather have a Marvel superhero space case instead of an unbranded alternative, they will have to make up for it in the budget.

When it comes to school uniforms visit the school second-hand shop to see if they can assist with any of your uniform requirements. They usually charge a fraction of the price you would pay in clothing outlets and often their stock is almost as good as new.

Underestimating the cost of books, stationery, uniforms and transport is a common occurrence in many households. It is advisable to think “how much can I afford?” as opposed to “how much will it cost?”. It’s always advisable shop early and avoid panic-shopping at the last minute and spending more money than you can afford.