Step 10 – How to get money savvy: Budgeting

I have had to manage my own budget fairly tightly since the first hard lock down started a year ago. With a few months of zero income and being forced to spend my savings, I knew what i needed to do first to make sure I was not spending more than I earned. I relooked my budget and was ruthless at cutting costs. I even cut my food budget in half and spent more time cooking and planning my meals better.

When was the last time you relooked your budgets? How often are you even checking your bank statements to be sure where all your money is going?

Budgeting and sticking to our budgets can help us to save more, pay off debt quicker and manage the money we do have.

What is a budget?

A budget is a spending plan for our money. It helps us to manage our income and expenses to ensure that we are not spending more than we earn.

Having a budget will help you identify whether you have excess cash or excess debt at the end of each month. Excess cash will enable you to save and invest each month, whilst excess debt will shift your focus to paying off this debt and to not skip these necessary payments.

Why do we budget?

  • It helps you to be proactive rather than reactive.
  • It helps you to identify your bad spending habits. So be honest with yourself on what you spend.
  • It helps you to not spend more than you earn.
  • It helps you to save to not only prepare you for emergencies but also helps to set ourselves up for retirement.
  • We budget so we can stay focused and reach our financial goals.
  • Following a budget can give you peace of mind because you know where you always stand.

Making a budget is the most important thing you can do to manage your money.

Download your free budget sheet here!

 

 

Tip 9 How to get money savvy: Debt management

South Africa is a buy-now, pay-later society. The effects on young people’s financial literacy are thus characterized by the same behaviour patterns as parents and society as a whole. These are high credit and high consumer behaviour with very little savings, and in turn high social risk behaviour. MSK is working to change this disastrous pattern.

The internet loves making lists of things, from top 10 beaches you have to see, to the top 10 restaurants in your area. So it’s no surprise that there’s a list of the top 10 reasons why people fall into debt. Some are fairly obvious, some are a little more excusable and one is absolutely ridiculous.

Bankrate.com’s list of the top 10 leading reasons for debt starts off with reduced income/savings. That stands to reason. Next up is divorce, followed by an important one, namely poor money management. The list goes on through unemployment, gambling, medical expenses, saving too little, no money-communication skills, banking on a windfall and finally, yes – FINALLY – financial literacy.

It’s no wonder that as South Africans, 70% of income earning adults are in over indebted when ‘financial literacy’ comes in at number 10. It begs the question, if financial literacy was at the top of the list, would there be a list at all? There are glaring inadequacies in the education system, from primary school right the way through to tertiary education that does not include any sort of formal financial literacy.

Financial literacy is a cornerstone of prosperity and security. It builds confidence and knowledge in the lives of individuals and the country as a whole. We cannot address the issues of financial inclusion and equitable and sustainable socio-economic development without addressing financial literacy.

There is no use in trying to solve our financial problems if we don’t understand finances in the first place. Our lack of financial literacy in this country breeds a society that is constantly playing catch up with their finances and, worse still, putting out fires constantly.

Until we see a shift in paradigm that sees financial literacy (or lack thereof) as the number one cause for debt and financial instability, we’ll spend our lives reading about the top 10 beaches to visit, as opposed to going to see them for ourselves as a result of our financial instability.

Ask us about our tailored programmes kathryn@moneysavvykids.co.za

Tip 8 – How to get money savvy: Grow your wealth – Investing

“Growing your wealth” seems to be the new buzz word around town. Most financial institutions are trying to educate “the man on the street” about investing and trying to get them to use their platforms. That’s how easy investing has become. There are online platforms you can start to use to trade shares, bonds, ETF’s and more. These institutions have made it very simple for us to try our hand at investing.

When it comes to your financial security, it’s all about planning and long – term goals.

Investing gives you the opportunity for financial gain but also the risk of losses. You can buy stocks, bonds, ETF’s, unit trusts or even invest in property, with the hope that the value of the asset will increase and you will make money over the long run.

Investing usually has a higher potential for growth over the long term than keeping your money in a risk-free savings account or cash.

Becoming wealthy is really simple… SAVE AND INVEST!

Why do we invest?

To grow money to create annuity income in the form of interest, dividends and capital growth.

What is investing?

  • Investing is putting your money to work for YOU.
  • We invest to grow your wealth over time in the form of interest, dividends and capital growth.
  • Not all investments are the same and it is vital to become a knowledgeable investor. Robert Kiyosaki often says that it is not the investment that is risky, but the investor.
  • Interest is the money that is paid to you when you invest money with an institution. Interest is the cost of money.
  • a sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves)
  • As a company grows, it becomes more valuable. If you buy shares in a company and sell it when it becomes more valuable, the price of the shares will increase.  You can make profit the on the shares you own.

 What is the difference between savings and investments?

  • Savings relates to the act of putting your money in a safe place.
  • Investment relates to putting your money away so that your money will grow.

At Money Savvy we run savings & investing workshops where we will teach you how to grow your wealth through investing.

kathryn@moneysavvykids.co.za