Most people have never written down a budget or kept track of their expenses, either because the idea of acknowledging what they spend frightens them, or because it just feels like such a hassle. Yet, writing down a budget is the only way you will get control of your finances. Former US vice-president Joe Biden once said: “Don’t tell me what you value, show me your budget, and I’ll tell you what you value.”
As our contestants clearly value financial freedom, their first challenge was to get a handle on where their money goes each month and to make some decisions about what they were prepared to live without in order to reach their personal goals.
Controlling impulsive spending
Town planner Mmabatho has already found an extra R2 000 per month to go towards her dream family holiday. She was convinced that there was no surplus in her monthly budget, yet with the help of her financial adviser, Gerrit de Jong, she discovered that with just a bit of discipline, she had around R2 000 to save. De Jong identified the necessary expenses and clarified which would be covered by her and which by her husband.
“Once we drew up the budget, we agreed that the challenge is to stick to this budget, otherwise it has no use,” says De Jong.
However, Mmabatho acknowledges that sticking to the budget is a challenge.
“It is very tough. I was used to spending my money on anything I want, like new shoes, takeaways or some lipstick,” says Mmabatho, who is now transferring her surplus money into a savings account so that it is not available to spend.
“It was shocking to analyse what I was spending on my KFC breakfast and takeaway lunches – I was spending about R2 000 a month,” says Mmabatho, who is now waking up a bit earlier to make lunch to take to work as well as coffee so she doesn’t pop into KFC on her way to work. She is also sticking to her petrol budget.
“I am now careful about where I drive to and whether the trip is really necessary.” Mmabatho was also horrified at her bank charges, which cost her R400 per month.
“I kept drawing small amounts of cash every few days. I didn’t realise how much it was costing. Now I draw a lump sum for the month.”
A budget, however, is not only about deprivation. It is also about budgeting for those luxuries that you value. Every month-end Mmabatho and her family go out for a family lunch after their church service. It costs them around R800, but it is important to them and it creates those special family moments that Mmabatho values, so that lunch is in the budget.
Watch those bank fees
Like Mmabatho, property entrepreneur Howard was also surprised when his adviser, Elton Govender, showed him how much he was spending on bank fees.
“My tenants pay their rent in cash and I deposit it at a high fee. The following day, I withdraw cash to pay for kids’ school transport, municipality bills, groceries and pay more fees,” says Howard, who says his bank fees were around R300 per month. He changed his account to the new Absa bundle Cheque Account for R99 a month with five free ATM deposits and withdrawals a month.
“There is a saving of R200 in bank charges if I use this account properly.”
Saving vs paying off debt
When analysing Vonne’s budget, his adviser, Maria Mogomotsi, included his girlfriend in the process so that they could more fairly allocate their joint expenses. Vonne also realised that his monthly stokvel contribution was unaffordable when he has high-interest debts to settle. When he receives his stokvel payment next month, he will settle his clothing account and stop further contributions until he has made in-roads into his debt. Vonne was also surprised to discover that nearly half his income goes to his car in the form of repayments, insurance and fuel. He will have to make some decisions around his car.
Reviewing insurance and outings
Just by reviewing her car insurance, Monique saved R222 per month.
“I spoke to my insurer and they came back with a better quote,” says Monique, who is also saving money by taking her daughter to the local park for their mom-and-daughter weekly outing.
“I used to take her to places like Wakaberry or other treats that cost money. When I took her to the park, she had far more fun playing with all the other kids there.”
Although Monique would like to cut back on her grocery bills, she does have some non-negotiables: two-ply toilet paper, her favourite brand of coffee and margarine.
“My husband thinks they are luxuries, but it’s worth it to me.”
Put money away before you spend
SANDF employee Zamokuhle has always worked with a budget, but his financial adviser, Charlotte Pretorius, advised him to put in a stop order for his savings.
“I think the biggest lesson so far for us is to budget together and commit to our savings via stop order rather than manually saving with what is left over, as then you can deviate from your plans.”
Get rid of credit cards
The main priority for Brigadier Buti was to stop using his credit cards.
“When we started the process, we decided that Buti should not use his credit cards so he could get this habit out of his system. Since his first meeting, he has not used his credit cards, which helps reduce his debt,” says financial adviser Matt Rudman.
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