By Riana Avis
It was Mr Micawber in Charles Dickens’s David Copperfield, who said:
“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
My grandmother used to say, “Cut your coat according to your cloth.”
The message is the same: Spend more than you have money coming in, and you’re setting yourself up for misery. Overdrafts. Debt, and before you know it, it can spiral out of control.
Spend wisely and not a penny (or cent) more than you’re bringing in, and you smile all the way.
The latter is certainly better than the misery of unrelenting debt, but in my view, it is not enough.
Life has a habit of throwing you curved balls.
In my experience, every month an unexpected expense turns up. The car breaks down. The roof leaks. Birthdays. Weddings. Christmas!
With the best of intentions, it can be difficult to stay within your spending plan.
You have one, don’t you? A spending plan? It’s commonly known as a budget.
Develop and work your spending plan
I prefer to call it a spending plan, because that is exactly what it is about. Working out exactly where you are going to spend your money, every pound and penny, (or rand and cent if you will), BEFORE you spend any of it. That means BEFORE you pay for the roof over your head, food, clothes, fuel, utilities, insurances and all the other things you spend your money on.
That way, you know exactly what is in the plan and what is not. So that when your friends come along and suggest a night out on the town that is not catered for in your spending plan, you can say ‘Not this time, it’s not in the spending plan.’
Will they ridicule you? Maybe. Will they think you’re a woose? A feeble or ineffectual person? Perhaps.
Somebody has to take a stand for your money.
It’s not your friends. It’s not the bank. It’s not the government. It’s not your manager at work, your teacher, lecturer or parents. And if you’re a child reading this, you’re old enough to learn to manage your money effectively.
It is YOU. Yes, that person in the mirror. Have a word with them and tell them this is it. From now on, things are going to be different. The two of you are going to be wiser with your money.
- You commit to getting rid of your debt.
- You commit to develop a spending plan.
- You commit to sticking to it.
- You commit to paying yourself first.
Build an emergency fund
10% of your income is ideal, but if that is a step too far, start with 1% or 5% or something in between. The point is to start. And grow that pot. And NOT dip into it at the first excuse! That way, you can build an emergency fund to take care of the unknown unknowns. Expenses that you could not foresee and therefore could not plan for.
By the way, your spending plan should include the amount you pay yourself first. Put that money in a separate savings account, preferably one that pays good interest and does not have too many restrictive terms and conditions. Set up a direct debit or standing order to transfer the money automatically to your savings account. Then watch your emergency fund grow. And grow.
Excuses be gone!
At this stage you may be thinking, ‘But Riana, I barely make ends meet, let alone have money left for saving!’
I know. I get it. I’ve been there. I’ve said the same thing. I detested the people who gave me that advice, back when I was a young mum.
If only I had listened, cut back on some expenses, started saving a small amount regularly. If only. It took me ten years, TEN years, to change my tune!
Ten years my feeble savings could have accumulated and earned interest, compounding the effect. I would be laughing all the way to the bank now!
Changing money habits is not easy. That’s why my Master your Money programme runs for twelve weeks.
I URGE you. Don’t delay. Start today.
Happy savings 😊
If you run a small business, you will enjoy this podcast, where Dawn of Celebrate chats to Tania Verdonk of Spirus Marketing