Money management tips
Wreckless with your cash? Then follow these simple steps and manage your money like a pro!
Only the rich need to get money managers to control their money, right? Wrong! With a handful of credit cards, cheque accounts and savings accounts – and lots of bills to pay – we all need money managers.
The difference is that if we are not wealthy, the responsibility usually falls squarely on our own shoulders, rather than on someone else’s. While most of us think money management are just paying the bills and staying one step ahead, there are actually nine key points to managing money well.
Follow these steps and you’ll be right up there with the pros!
1. Read your statements
When you get your bank statements, do you read them? Or do you just glance at them and look at the bottom line – what you have or what you owe? You should be looking at each line item, making sure that you are indeed responsible for each line item you’re being charged for. Credit card fraud costs us millions of rands. Unfortunately, many people pay for things that they never bought.
It is well-known that the now liquidated Health and Racquet processed a double debit run in December, knowing that many people would not notice the additional charge as they were too busy relaxing to worry about looking at their bank statements. Over a lifetime, incorrect charges on your cheque and credit card accounts can cost you a small fortune.
Check your bank account statements by cross-referencing them with cheques you wrote out, and credit card slips you have kept. Keep a written record of your disputes, and follow up on the correct handling of them.
2. Pay your bills on time
It wasn’t long ago that most companies did not charge interest on late payment of bills. Payment received a few days late would largely go unnoticed. But then these companies became wise to the actual cost of allowing most clients to get away with this. The result – interest on late payments and, in some cases, late payment penalties that can be particularly onerous.
Many of us lead busy lives; however it’s easy to fall behind a couple of days – no matter how good your intentions are. When it comes to paying your bills, it’s the date your payment is received that counts, not the date of the cheque.
Be on the safe side, and rather pay your bills a few days early.
3. Make sure you have funds available
Bounced cheques can cost you a small fortune by the time you pay the merchant a bounced cheque fee, and your bank another fee. And you will still need to make payment of the original amount. Bouncing cheques is also particularly hazardous as it goes down as a negative scoring with your bank. The next time you make application for credit; this will definitely count against you. Make sure you have the funds available in your account before making out a cheque. Don’t forget about the un-cashed cheques still needing to be processed through your account.
4. Balance your cheque book
This may seem like an old-fashioned thing to be doing, but there is a good reason that all businesses do a bank reconciliation every month, some even doing this daily. Problems can be noted and corrected early on, and each charge is verified and allocated. This process will force you to look at your statement more carefully.
5. Plan your spending
Most people don’t know what they spend their money on. If this is the case, then they are not able to prepare a budget of what to spend money on. So do yourself this favour. For two months, keep an accurate record of everything you spend your money on, down to the nearest ten rand. Categorize the spending into: accommodation/house, groceries, schooling/kids, motoring, entertainment; recurring debit orders etc.
Two things will become evident from the above exercise. Firstly, you will be more than a little surprised at how much you are spending that is not discretionary. In other words, how much of your spending is committed and comes off your account by debit order. Secondly, you will be even more surprised at how small bits of expenditure amount to a large total expenditure.
Now that you know how much money you spend, make a list of how much money you want to spend in each category. Be realistic when trying to trim expenditure in each category. Now look at your total budgeted expenditure, and look at how much is left to spend on the fun stuff, if any.
The best part of creating and sticking to a plan is that, once you’ve taken into account all the bills and regular expenses plus some savings (see step 8), you don’t have to feel guilty about spending what is left over.
6. Handle your banking
Be aware of the banking fees you are paying. For instance, you may be paying up to R8 to withdraw money from another bank’s ATM. Instead, try to withdraw from your own banks ATM. After all, if you only draw R50 and you are charged R8, that’s 16% – ouch!
Work out what your bank charges are costing you, and enquire from your bank if there is a consolidated fee option, that allows you to, say, write up to 15 cheques, make up to 5 withdrawals and deposits, and get two bank statements included in the charge. Remember, your bank is comfortable not giving you this sage advice, as they maximize their banking charges. A little attention to detail can save you quite a lot of money.
7. Pay off debt
It is easy to fall into debt, and about ten times more difficult to get out of it. Debt is simply the excess of expenditure over income. You know how much you earn, but most of us don’t know how much we spend. This emphasizes the need to do step 5 – planning your spending – meticulously.
It helps to have a goal date by which to become debt free. Set that date, and develop a plan to reduce your debt levels. Firstly, make a list of all your debts. Then take the smallest debt, and allocate R400 to repay this debt. When this smallest debt is repaid, take that same R400, lump it with the repayment amount that was servicing that debt, and put it towards repaying the second smallest debt. Soon you will have worked your way through your smaller debts, and can start work on the bigger debts. You will be surprised how quickly the benefits will snowball, and soon you can live a better, less stressed, debt free life.
8. Save
It’s probably easier to save than to pay off debt. How do you save money? Do it the same way you spend most of your money. You’re good at doing that right? Decide how much you’re going to save monthly, and have this money transferred out of your cheque account into your savings account on pay day. After several months, this will become addictive. You will notice the balance building, and will be earning positive cumulative interest on the balance.
The benefit of saving is enormous. You will be comforted by the fact that any unforeseen expenses can be borne out of savings instead of being financed by additional debt.
9. Check your credits report
Your credit record is an integral part of your financial life. A good credit record can make all the difference when applying for that higher paying job, or in negotiating better interest terms on your bond. Ensure that you check your credit record every 3 – 6 months to ensure that nothing negative has been placed on it, and that no-one is committing identity fraud by spending under your identity. Your credit record from both TransUnion ITC and Experian is available on Credit Health in the form of the Credit Health Report™.
Now that you know how to handle your money like a pro – go for it! The cumulative benefits on your financial stability and credibility will be enormous.
For more info : www.debtbreaker.co.za
