We often don’t consider having a factual and up-to-date budget as important. Most my clients would admit it just makes them depressed! Strangely enough it would do just the opposite if you had a budget.

Let me give you a better idea on why I say this. Right now you know you owe money, you don’t know how much exactly and you don’t know where to start. By having a comprehensive budget you would start seeing your financial ‘map’. Where are you chasing your tail and where could you really make a dent.

The biggest benefit of a budget is knowing who to pay off first and where your money is going!

2) What are some of the key components of a good budget?

When I ask my new clients whether they do a budget, most of them admit it’s more a few scribbles of on a piece of paper at the end of the month. This is great for a month or two if you have done your comprehensive budget. Your true budget must have detail for example your Nett income from all sources, monthly payment, total due to each facility with the name of the facility and most importantly the interest rate each creditor is charging  you. Don’t forget to include your spending money on your budget!

3) If someone has failed to keep to their budget over the past three months of the year, what advice can you give them to help stick to the budget?

No one really likes being told what to do and that is after all what your budget is doing – telling you how much you are allowed to spend. Instead of fighting your own desire to be financially free turn it into a positive. We all ‘fall off the horse’ sometimes and the best way to get over it is to just get right back on! If you have not been following your budget for a while then redo it but add a prize – a little bit of money just for you to treat yourself on the condition that you stick to your budget for at least 4 months and keep repeating this if you see it works.

We don’t like being told what to do but we all love getting a present!

4) What are some reasons why people fail to stick to budgets and how can they curb those.

Whenever you see yourself not sticking to your budget, almost purposefully, look a little deeper. A lot of our ‘money problems’ are directly because of issues we carry. Let me give you an example. If you were raised in a house where you were constantly told there isn’t enough food you might find you sometimes buy more food than you need, just in case you want it. This affects your budget yet unless you understand why you are doing something, how would you be able to stop doing it?

Another very common reason people don’t stick to their budget is trying to uphold an image. Not living within your means. A way to try to live within your budget is to start ‘shopping around’ rather than going to the most expensive stores. There are so many places where you can get an original for so much less. This way you decrease your expenses whilst still getting what you want.

5) If a person is having problems managing their money, what is the best way to get out of debt?

When you feel like you are drowning in debt it is very hard to see the light at the end of the tunnel. The best advice I can give a person is to first know where you are right now. Know what you owe, to whom and what interest rate you are paying. Take your power back by having knowledge then only can you start working on a plan. Making more debt to pay off debt is not always the best option. Pay off your small debts first so you don’t get despondent and more importantly you have more money to pay off the next one.

6)  If a person has an extremely tight budget, would you still advise them to still save and if yes, how much?

In today’s life it is very hard to have any extra money after paying all the bills. The problem is even if we do pay off a debt we very seldom if ever start saving that amount. Often my clients would say “ I will start saving as soon as I’ve paid this off” When I see them 6 months later they did not, but instead they have spent the money and can’t figure out on what.

There is never the right time to save, there is only now. Begin to save now. If I suggested you save R560 a month you would tell me there is just no way you could. If I told you to try and save R120 a week you would say it is a bit high.  Would you be able to save R20 a day? Instead of buying lunch every day, pack yourself lunch made at home and there you go – you are saving R20 a day.

7) What are some good ways of saving in terms of policies?

Policies are a forced savings vehicle. There are a couple of options so you need to make sure you know what your expectations and need is. Taking an Endowment with a fixed term might not work if you are thinking of using the money in a year’s time for studies or a holiday. If this is your intention you should rather look at Unit Trusts or a Money Market account.

Education policies work on a fixed term – 5 years or 10 years. These policies are good because they come off your account every month without fail. If you are able to get used to the deduction and make sure the money is there for it not to lapse, you will end up forgetting about it and when the money comes due it would be like a great unexpected bonus!

It is important to speak to an advisor to make sure you have the right product for your needs.

8) What are the most important policies to have and what is the best way of finding the one best suited to your budget and your family's needs?

If you have dependants that would be affected in the event of your death it is very important to make sure they are taken care of when you are no longer there. This is a life policy. All Assurance companies offer this but it does depend on your other needs and budget where you would find your solution. Trying to do this "direct” more often than not lead to signing the wrong product.

The next important policy would be your Retirement Annuity. It has tax benefits and when the time comes that you are no longer able to work, this helps support you so that your children are not given this burden.

9)  What criteria should one look for when a) deciding on a policy      b) deciding on a bank?

a) Speak to a professional. Do your research. Know your true need. Work out your budget before you speak to a Financial Advisor.

b) Research the costs of the bank. Do research on the standard of service the bank offers. Research the various bank account options. Don’t just open an account because your parent or friend has one there. An honest mistake most of us made when we left school!

10) Please can you give any additional budgeting tips which you think would be relevant?

Detail, your budget once a year at least should be full of detail. Anything that would assist you in seeing who is best to pay off first.

Pay the small ones off first; don’t start with the biggest ones as this only makes a person despondent when you see no progress with your attempts

Be ruthlessly honest with yourself when you do this budget. This is not for anyone else’s eyes. This is for you to truly know where you are so you know where you are going

Start a ‘family budget’ with the kids, when they are older than 5 or 6. Having your whole family’s buy in makes it a lot easier than trying to do it all on your own.