Most people have a dream of making a million rand, but it remains a dream if you don’t do anything about it. The easiest way to make a million rand would be to save R1000 a thousand times , this will add up to R1 000 000. Impossible? Step 1 start a budget and manage this budget every month. Yes if you are young it would be hard to find that one thousand rand but remember you are creating a new habit that you could repeat for 40 years of your working life.
Understanding your financial planning is knowing what your household and your children’s expenses are every month and how you need to manage these expenses. Make no mistake there are always those unforeseen ones to like: “Mom I made the provincial netball team!” The only way to really manage income is with the use of a comprehensive budget .
Most people have a dream of making a million rand, but it remains a dream if you don’t do anything about it. The easiest way to make a million rand would be to save R1000 a thousand times , this will add up to R1 000 000. Impossible? Step 1 start a budget and manage this budget every month. Yes if you are young it would be hard to find that one thousand rand but remember you are creating a new habit that you could repeat for 40 years of your working life.
Understanding your financial planning is knowing what your household and your children’s expenses are every month and how you need to manage these expenses. Make no mistake there are always those unforeseen ones to like: “Mom I made the provincial netball team!” The only way to really manage income is with the use of a comprehensive budget . If your budget is made up of 2 columns one with the names of expenses and the other column the cost you won’t see any potential savings that could create wealth. What are doing in reality is just spending and not planning your future.
Most people stop reading here because they think that they are not good with math and finances. Please understand math and money are not the same thing, they are related but definitely NOT the same. You might need math if you would like to make a moon landing which I am sure is not on your bucket list and if you do you should get to know either Elon or Richard. Money however is something you have to use every day, the trick is to respect it, understand how hard you have worked to get it and to invest it rather than spending it. You can see where money goes when you track your spending with your budget. Use a spreadsheet!
I would say the average cost per month for a child in a reasonable government school living in a pretty standard 3 bedroom house and relying on a sedan for transport would be approximately R20k per month. This amount is what you will need every month to get them to age 18 with a matric certificate only. After this costs increase in multiples of 1000’s.
To make your budget work you are going to need exact figures every month.
Most people have a dream of making a million rand, but it remains a dream if you don’t do anything about it. The easiest way to make a million rand would be to save R1000 a thousand times , this will add up to R1 000 000. Impossible? Step 1 start a budget and manage this budget every month. Yes if you are young it would be hard to find that one thousand rand but remember you are creating a new habit that you could repeat for 40 years of your working life.
Understanding your financial planning is knowing what your household and your children’s expenses are every month and how you need to manage these expenses. Make no mistake there are always those unforeseen ones to like: “Mom I made the provincial netball team!” The only way to really manage income is with the use of a comprehensive budget . If your budget is made up of 2 columns one with the names of expenses and the other column the cost you won’t see any potential savings that could create wealth. What are doing in reality is just spending and not planning your future.
Most people stop reading here because they think that they are not good with math and finances. Please understand math and money are not the same thing, they are related but definitely NOT the same. You might need math if you would like to make a moon landing which I am sure is not on your bucket list and if you do you should get to know either Elon or Richard. Money however is something you have to use every day, the trick is to respect it, understand how hard you have worked to get it and to invest it rather than spending it. You can see where money goes when you track your spending with your budget. Use a spreadsheet!
I would say the average cost per month for a child in a reasonable government school living in a pretty standard 3 bedroom house and relying on a sedan for transport would be approximately R20k per month. This amount is what you will need every month to get them to age 18 with a matric certificate only. After this costs increase in multiples of 1000’s.
To make your budget work you are going to need exact figures every month.
How do you use this budget?
An excel spreadsheet is perfect to measure. Firstly you measure your sources of income, even if you bake cupcakes add them all in. Total your columns and annualize your income. Populate every month with the same income except the month when you get your salary increase, bonus or maintenance increase.
See the example below.
Income | Jan | Feb | March | April | May | June | July | Aug | Sept | Oct | Nov | Dec | Annual |
| Salary after deductions | 40000 | 40000 | 40000 | 40000 | 40000 | 40000 | 40000 | 40000 | 47000 | 47000 | 47000 | 47000 | 508000 |
| Bonus /Shares/Dividends | 0 | 0 | 0 | 0 | 40000 | 40000 | |||||||
| Rental income | 10000 | 10000 | 10000 | 10000 | 10000 | 11500 | 11500 | 11500 | 11500 | 11500 | 11500 | 11500 | 130500 |
| Maintenance | 20000 | 20000 | 20000 | 20000 | 20000 | 20000 | 21000 | 21000 | 21000 | 21000 | 21000 | 21000 | 246000 |
| Total income | 70000 | 70000 | 70000 | 70000 | 110000 | 71500 | 72500 | 72500 | 79500 | 79500 | 79500 | 79500 | 924500 |
| Salary Increase | 0 | 7000 | 7000 | 7000 | 7000 | 28000 | |||||||
| Rental increase | 1500 | 1500 | 1500 | 1500 | 1500 | 1500 | 1500 | 10500 | |||||
| Maintenance increase | 0 | 1000 | 1000 | 1000 | 1000 | 1000 | 1000 | 5000 | |||||
| Bonus | 40000 | 0 | 0 | 0 | 0 | 0 | 40000 | ||||||
| 83500 |
What you need to see and the questions you should ask?
- Notice that your annual income is R 924 500 which becomes a big number when compared to one month’s salary. This is a lot of money rather than wonder where your money went at the end of the year, structure your spending, set goals and channel your income so that your money will work for you in the future. Plan annually vs month to month! Just repeating the same recipe won’t give you a different result.
- Next ask the question how much time did you spend generating this income and where will it go? How do you get more income? Do you have a side hustle and where does this money go?
- Whatever you can “save” you should invest. 1000 x 1000 = 1 000 000
- The increase forecast of what you will receive during this year is R83 500, remember you were used to not having the extra R83 500.If you spend this money before you receive it will be gone.
- What can this R 83 500 do for you and where would you like/want it to go?
- A budget will give you an indication of how much retirement capital you will need when you retire.
- Your total annual income of R 924 500 should tell you what you are worth dead, injured or alive. The kid’s expenses will fall away at some point, but they will be replaced by old age issues and tissues.
- An annual budget will help you see the present and the future, if you get this right early on it may just give you the ability for your money to look after you.
- You will always find another way to get money to pay for unexpected expenses once you are in the habit of not spending.
- Last question to ask yourself is how many pay checks are you away from retirement? If you are 30 you still have 420 pay checks. Age 45 you have 240 left, the point here is you are running out of time which equals money.
If you would like more information on how to manage you budget please send us an email.