It’s a really good feeling to have earned some money but all too often it doesn’t seem to go very far. Perhaps you get paid monthly? This means that you have to manage your money carefully for quite a long time. If you’re paid weekly or fortnightly it is a bit easier but you’ll still need to be careful how you spend it. It’s always a temptation to spend it all quickly. Perhaps you have to give a portion of your salary to your family as well as pay your own expenses? It can be tricky trying to balance all of these on a limited amount. You don’t want to land up in a position where you don’t have the money to get to work or pay for the basics you need.
Here are a few tips on how to manage your income:
Start with a budget
A budget helps you work out what your income is versus your expenses. In one column, write down what you earn and in the other what your known expenses are.
This is an example:
|Contribution to family||R2000|
|Money left over||R1700|
Once you’ve done a budget, you can see how much money you have left for the month or fortnight and then you can divide this into the number of weeks until you get paid again. This shows you know how much ‘free’ money you have to spent per week. If you splash out in the first week, then you’ll have nothing left to use for extras later in the month.
Pay your monthly expenses first
It’s a good idea to always pay those necessary monthly expenses first before you buy anything else that isn’t essential. Landing up in debt is really not fun and you have to waste money paying interest on something you already have.
Read Hire Purchase contracts carefully
It is always tempting to buy items on hire purchase. This is when you ‘buy’ something and then pay it off in installments. Being able to do this can be very useful but be careful about the amount of interest that you have to pay in order to own the item.
Read the HP agreement carefully and make sure you understand what the terms of the loan are. You will need to factor in these interest payments into your budget and this will reduce the money you have available to spend.
Try not to fall behind with your payments. This can lead to big interest payments which are a huge waste of your hard earned money. In the long run, not paying these debts can lead to being blacklisted which is a situation you really don’t want to find yourself in.
Pay cash for items when possible
As mentioned in the previous point, paying things off is an expensive option. The other option is to save your spare money in your bank account until you have the cash to buy the item. This is a double win! You get to earn some interest for your money (it may not be much to start with but the more you save the more interest you will earn) and, when you buy the item, you don’t have to pay any interest to the shop!
Use hire purchase only when it’s really necessary and try and pay cash for luxuries. Perhaps buying that dress or shirt feels like a burning desire but it isn’t really necessary if you have other items to wear in the meantime. Save your money and pay cash for it and you’ll have more money all-round.
This is really hard to do and perhaps it’s not something you can do immediately you earn your first salary. But it is something to think about as soon as you can.
This saved money, as mentioned before, earns interest in the bank, makes it easier to get big loans for items such as a house or car and is available should you have an emergency. Perhaps someone in your family falls sick and needs financial help? You will have the money to help them.
Once you’re able to save, set yourself a monthly goal and stick it. You don’t need to start big. Saving even R50 a month is a start.
Reduce your debt
If you find yourself in debt, review your budget carefully and cut down on everything you can. Perhaps there are some items you can cut back on or buy the following month? Try and do this as soon as you notice you are in debt and sort it out as quickly as you can.
Being able to afford everything you need and want is difficult and this is why doing a budget is one of the most important tools you can develop. Once you’ve done this, you’re well on your way to managing what you earn.
Tell us: Do you find these tips useful? How are you managing your income?