Spending is out of control! The need for credit is out of control! Well that is what all the experts are saying here in South Africa.
It appears that we will have to once again pull in our belts. There is the ever hungry and controversial e-tolling situation and of course the petrol price that bounces around month after month, not to mention the cost of all the strikes that we seem to be having, one after the other and of course let’s not forget the exchange rates that seem to have more “bounce per ounce” than a regular yoyo!
So how do we control our money when there are so many external factors that we have very little, if any control over.
Well the reality is that we very much do have the control over what we do spend, however the problem is that we often don’t know where the money has gone because we are spending money without taking notice of what we are doing.
Sure, most of us usually have budgets in place that cover things like rent or bond or levy and many of our accounts are automatically paid by debit orders and of course we are acutely aware of these, especially if our cell phones ring or ping when money goes out of our bank accounts.
Here’s the thing though – how many of us actually know exactly how much we are spending and what exactly we are spending it on and I mean to the last cent? I know I didn’t until I started keeping a monthly journal.
Once I knew how much I was spending and what I was spending it on, I was then able to make a conscious decision about where I wanted my money to be spent and equally important (if not more so) how much I wanted to allocate. In this way I am able to control what I spend and where I spend it. This is more of a spending plan – it’s spending your money on paper before you spend it in reality.
Now that I knew where the money was going and how much, I was able to convert my monthly spending plan into an annual spending plan. What I did then was to create categories (along the lines of my general ledger in my company books) and split up the allocations. So quarterly requirements were split into 2 (so I could put away money on a monthly basis instead of having to suddenly come up with a lump sum every 3 months) and so on.
Now here is the fun part. Each and every cent of your income must be allocated! Yep – that’s each and every cent. You should have a zero difference between your income and your expenses.
I can actually see the pained expression on your faces, but here’s the thing – you get to allocate everything and that means it can be allocated to a savings account or a holiday account or a deposit on a home account. You are the person who tells it where to go. You are the person who is in control of the where it goes and where it is allocated.
You are the person in control of your finances!