Tips on how to cut expenses from your budget and help ease financial stress
At the moment, whether its Covid-19 itself or the repercussions on the economy, the world of 2020 is stressful. We all know someone, ourselves included, who is struggling at the moment.
The South African economy, and most of the world, is going to experience sharp economic contractions this year. If you don’t have control over your financial spending and knowledge of your financial position you add to your stress. It doesn’t matter how much you earn, you need to know where you money is going if you want to have control over your finances.
Firstly, you need to work out your goals. What are your goals as a family or individual, what are your dreams and plans for the future? This can be anything from studying, buying a home, a holiday, saving for retirement, getting out of debt or any other big dreams and goals. Where do you want to be in life?
The next step is to work out your income and expenses. This requires understanding your income. Make a spreadsheet or list with all the income of the family. This could be salaries or interest you receive on an investment.
This list can be quite daunting. A useful tip, download your spending from your online banking platform into Microsoft excel (most South African banks allow this option). Then you can sort your spending and line items by category and amount. It is also useful to see what you spend on regularly (sometimes you spot things coming off your account monthly, for example mobile phone apps, that you didn’t even know you were paying for).
Expenses are firstly made up of obligations and necessities such as rent, repayments on a car or home loan, education, travel, insurance, food and household consumerables like cleaning products and toilet paper.
By looking at what you actually spend every month, you will be able to sort out what your needs are versus your wants. Here you need to start prioritising, and making decisions about how you would like to spend your money.
Now you need to work out your plan.It is important not to forget non regular expenditure such as servicing your car, school clothes, home maintenance, and emergency medical expenses. Compare your three lists of goals, income and expenses. You will now know what you are working with, what your options are and what is possible right now and in the future.