Financial Planning: Budgeting as a family in 2019
New year – new resolutions!!! One of the best ways to start budgeting for a new year is to get everyone in the family involved in the family finances.
Mellony Ramalho, African Bank’s Group Executive: Sales, Branch Network, says everyone starts a new year with strong resolutions but sometimes these are difficult to maintain or lose their appeal as money gets tight in January.
Budgeting is key and learning how to budget properly and sticking to a budget is a discipline that everyone should learn. “A budget should make provision for the here and now, but also include room for future goals like retirement or education. How well you manage your money and payments now will determine your future financial wellbeing. It is also important to involve the whole family so everyone understands the importance of saving,” she says.
It all starts with drawing up a budget. “Make it a fun exercise for the family. For the kids this could include things like stationery, school trips, sports equipment, school lunches, tuckshop money, outings and so on,” says Ramalho. For the adults, remember to include quarterly and annual expenses as well as daily cash spending. Include any policies such as retirement annuities, disability funds, medical aids and so on. Lastly, make a list of all your debt repayments.
Once a list of expenses has been drawn up start working on an income list. Use current figures from your latest payslips, bills and bank statements. Remember to include any additional income that you will be receiving, for example, grants, incentives, bonuses or part-time income, etc. “Only add the additional income into your budget when you are sure of the exact amount that you will be receiving,” she adds.
Kids should also think about what income they receive. “This could include pocket money, monetary gifts, cash received from doing chores and so on. Teach them how to add up their income and then speak to them about what they would like to spend it on. It’s a great opportunity to teach them how to save money each month and learn about the concept of financial goal setting as they may need to save up for a special new toy or a fun activity,” advises Ramalho. She says ideally it is good to get kids their own savings accounts as early as possible so they can learn about money. “At African Bank, for example, we are shortly launching My WORLD, an innovative transactional banking account which will include savings pockets which can be allocated to your kids. This is a great way to monitor their spending and saving and teach them along the way.”
Take your expenses and debt repayments and deduct these from your income to get an idea of what you have left over at the end of the month. If you have a shortfall, Ramalho recommends cutting back on luxury items that you don't need. “If you have additional income use it to try and pay off debt. Start with the credit with the highest interest rate.” You may also wish to find ways to get out of debt fast. Contact your nearest African Bank branch for debt counselling.
Financial goal setting is then the next step. “Make a list of your short- and long-term goals, and know what they are. Determine when you want to reach your goals and how long you will need to save for those goals,” she says.
“Remember goals will only be reached if you make them part of your budget and saving plans.”
Make sure your goals are realistic, achievable and measurable,” says Ramalho.
“Remember to reward yourself when you see improvements and good financial behaviours. Celebrate as a family when goals are achieved. It’s a great way to bring the family together and to share financial responsibility,” she concludes.