5 minute read
Financial Fitness - Avoiding Januworry
How You Can Plan Ahead With A Smart Household Budget
By Koketso Mamabolo and Shumirai Chimombe
As the festive season approaches, many of us are planning to take that muchneeded holiday break, maybe take a trip, or just spend quality time with family and friends. And for those who are lucky enough to receive a bonus or 13th cheque, this brings that extra welcome boost.
However, it is important to keep in mind that January is not too far - and it’s a very long month which comes with its own financial responsibilities because the bills will still need to be paid. But with some good financial planning, Januworry doesn’t have to hurt.
50/30/20 rule
The 50/30/20 rule is straightforward and one of the most popular household budgeting tools.
Needs
Half of your net income should go towards fulfilling your needs - the things that you genuinely could not live without:
Housing
Transport
Groceries
Utilities
School fees
Housing could be your rent or mortgage payments - either way, you need a roof over your head and it’s important to allocate a significant amount of that 50% to ensure you have shelter. Transport covers car payments, petrol, ridesharing and public transport. You can bring your transport costs down by finding ways to save on petrol, or buying monthly bus passes, which can save you as much as 50% compared to buying a ticket every day.
Wants
The most difficult part of going through a budgeting process is coming to terms with how much of what you spend your money is unnecessary spending. You don’t need to stream series and music - you want to. You don’t have to order food to your doorstep - you want to. You don’t need to buy the latest smartphone, despite upgrading the year before - you want to. As difficult as it is to come to terms with, you need to spend less on the things that you want. Thirty percent is still a significant portion, allowing you to indulge here and there, but when the crunch hits, as it has in recent months, you will need to dip into your wants to fulfil your needs. In other words, you need to be one of those “there’s food at home” people when the kids ask for a takeout.
Pay Off Your Unsecured Debt
It is important to consider paying off expensive unsecured debt with your bonus as this is a great way of saving money in the long run.
In order to do this, you will need to make a list of all the money that you owe, the amount outstanding, and the interest accumulated over time to have a clear picture of how much of that debt you can pay off with your bonus.
Add To Or Start An Emergency Fund
Now is the ideal time to use a part of your bonus to start or add to your emergency fund through a savings account. The idea here is for you to save between one to three months’ worth of income in an emergency savings fund. Having an emergency fund will be of essential help in the future when you have unexpected expenses. It will help you in avoiding going into debt to pay for it.
Don’t Forget To Spoil Yourself
You have worked hard all year and gratification can come from looking at things you would not normally purchase or even taking the family away for a holiday.
Be Smart With How You Manage Your Money
Having a framework in place is great but what are some of the steps you need to take along the way? Here are five things you can do to help you build a framework plus ways that will help you be smarter with your money:
1. Know how much you’re working with
It’s important to know how much you have to spend. What’s your income after tax? What are your bank fees?
2. Track your spending for a month
By keeping track of what you spend in an average month, you’ll have an idea of where your money is going. What are you spending the most on? What are you spending too much on?
3. Find out what your spending on bank fees
Card purchases, withdrawals, debit orders, transfers etc. these all come with varying fees which can pile up. Some are unavoidable, but it’s worth it to consider withdrawing less cash (it’s safer too) and swiping/tapping more. If you need to withdraw, try to do it when you visit the supermarket for groceries.
4. Try rewards programmes
Rewards programmes at banks and supermarkets can save you money without you realising it. From discounts on groceries, to points that you can use to buy goods, there’s something for everyone.
5. Get the family involved
Work with your partner on the budget. Teach your kids about the cost of living. Develop a savings culture. Having buy-in from the whole family will help you keep the spending in check.
At the end of the day, it makes sense to treat ourselves during the festive season and treat ourselves after a long year. It’s also important to keep in mind that we will still have responsibilities in the new year and it is advisable to budget for the future.
