GUEST POST : IT’S YOUR FUTURE, SO START PLANNING YOUR FINANCES NOW
There is never a better time to plan for the future than right now. Everything you do from today on will impact yours, and your children’s, financial status down the road. If you’re not sure where to start, keep reading for practical advice on how to manage your money.
CAN YOU AFFORD YOUR LIFESTYLE?
There are many factors that come into play which determine what you can afford — your income is perhaps the most important. However, when your lifestyle expectations exceed your paycheque, the debt can add up quickly. This may leave you unable to pay your bills or possibly having to give up what you own.
So, take a hard look at your lifestyle. If you’re going into debt every month, you can’t afford it. Start by adding up your income and deducting your expenses. Your largest expenses are likely your home and your vehicle. A home cost calculator can help you determine if your current living situation is too much for your budget to bear. In addition to your mortgage payments, you also have to consider expenses that go along with homeownership. This may be utilities, Home Owners Association dues, and the cost of transportation to and from work. One way to save money is by downsizing to a smaller home closer to your place of employment.
If you’re accustomed to living one way, you may not even be aware that you’re overextending yourself. Lexington Law explains that you must further break down your monthly expenditures into two categories: necessities and entertainment. The necessities column includes utilities, groceries, petrol, and other non-negotiable bills. Movies, dining out, and unnecessary expenses should be cut to an absolute minimum.
ADDING AN ALTERNATIVE INCOME STREAM
Before you can truly plan for the future, you have to get your income under control today. Consider getting a part-time job, or if you enjoy baking start selling your baked items, which will serve two purposes. The obvious benefit is more money. The second is simply that you will have less time to spend on other things. For example, instead of renting a movie and ordering pizza, you can spend those two hours making money. This extra cash can be put into savings. If you find the right part-time job, you can make almost twice as much as you would spend in the same amount of time.
DON’T SKIMP ON THESE ITEMS
Planning for the future typically means two things: planning for retirement and paying for your children’s tertiary education. One of these takes priority over the other. Hint: It has nothing to do with a degree. Don’t skip out on saving for your own future in order to pay for your kids’ education. Other items include life insurance (which you don’t have to carry forever) and paying off your current home loan (mortgage), the latter of which is especially important if you plan to live in your current home after you retire. Vanguard’s retirement calculator can help you figure out how much you need to save to retire comfortably based on your age and income.
TEACHING THE NEXT GENERATION
Once you have your financial plan in place, it’s time to teach your children how to plan for their economic futures. Set a good example by allowing your children to spend their own money on things they want. Dave Ramsey uses a pack of toy cars for an example. If it costs R50, have your children take that much of their own money to pay for the toy themselves. Let them handle the transaction. Avoid impulse buys and arguments about money, because your children are watching. By the time your children are in the double digits, make sure they have a savings account and understand that they will be, at least partly, responsible for paying for their tertiary education. There are many types of account (and many banks to choose from). JustMoney.co.za explains this in this post.
Planning for your financial future is an intimidating process, but it’s one that must be complete nonetheless. Although it sounds cliché, this is truly one time in life where failure to plan is planning to fail.
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