Do you budget? I’m always surprised by just how many individuals and households don’t. Budgeting is at the foundation of successful financial planning not just for businesses but for all of us. And it is crucial whether you earn $1,000, $10,000 or $100,000 (!) a month. If you don’t know how much is flowing in and out of your bank account each month you won’t have a hope of taking efficient control of your finances.
Budgeting simply means tracking and predicting how much income and expenditure you receive or expect, typically each month. Income is what comes in to your household in all forms including salaries, pensions, state benefits, interest on bank deposits, rental property income and dividend payments. Expenditure includes regular payments such as a mortgage or rent, utility bills, credit card payments, school fees, life and other types of insurance payment as well as what you spend each month on food and entertainment.
Good financial planning means always ensuring that income exceeds expenditure. Budgeting enables you to curb overspending and avoid getting into debt. It also enables you to set aside a specific amount to save towards your long term financial goals such as retirement planning and future education fees. Investor extraordinaire, Warren Buffet, famously said ‘Do not save what is left after spending; instead spend what is left after saving.’ and these are very wise words.
To facilitate this, build savings into your monthly budget and arrange for them to be instantly transferred out of your current account, and temptation’s way. If you don’t chances are that the instant gratification from blowing the money on new clothes, weekends away, the latest tech or one too many fancy dinner may just prove too enticing.
Why is saving important? Well consider that if you are in your 20s now, you have a 23% chance of making it to a century. And if you achieve centenarian status having stopped work at 65, that means supporting yourself on your retirement savings – and maybe a meagre government pension if you’re lucky – for 35 years plus. If you want those years to be golden, not gruesome, saving is the way forward.
Of course where you put those savings will make an important difference to the amount that you will accumulate after decades of saving (see my post on compound interest. I can help you work out how much you should be saving each month and suggest how to invest your money to make it work its hardest for you. Why not contact me at email@example.com for a financial review? An initial consultation won’t cost you anything.
I have decades of experience in the financial services industry in South Africa. I worked for Discovery, the country’s largest insurer, for 16 years as a Specialist Consultant/Franchise Director, heading up many of their franchises, before moving to Regal, a leading financial advisory firm.
I decided to relocate and join Infinity in Ho Chi Minh City which would give myself offshore experience in the industry and satisfy my craving to explore a different culture.