Review your budgets, investments and wills thoroughly

Let’s just say that recent years have been exceptionally tough. People have lost their jobs and income, loved ones have passed away and the landscape is simply not the same as it was before. We find ourselves re-examining how we are living as well as the way we are planning towards our future.

With this in mind, it’s pertinent that we should all take a fresh look at where we stand by reviewing budgets, investments and wills thoroughly.

It’s an important task, but one that we tend to constantly roll over onto tomorrow’s to do list.

In this article we go into a couple of simple strategies on how to make any necessary changes to existing financial plans with little effort.

Planning your money:

If ever there was a sure-fire way to get ahead financially; it is to be intentional. By intentional, we mean actively planning how you will be spending your money in the month ahead. We start with just one month, as it is manageable for anyone needing to reassess their current situation. Unfortunately, the term used for such planning has a negative connotation for many people.

If you redefine the definition as  the following, “budgeting” makes absolute sense, though:

Budgeting means spending with purpose before the month begins.

Spending with purpose is the key phrase here.

It’s about being intentional with where your money goes.

By taking a couple of hours a month to plan your budget, you are buying your freedom.

You may have felt overwhelmed and fearful that budgeting will limit your freedom.

In actual fact, it gives you freedom!

Firstly, you will feel a strong sense of control and accomplishment. After all, it is an action plan and it provides a clear picture. Moreover, it will help you achieve the goals you are working towards. Once something has been budgeted for, there is also the huge psychological benefit of being able to spend without feeling guilty.

Many people have even reported that they find “extra” money.

Budget to zero before the month begins:

Let us consider one of the easiest ways to budget. It is called zero-based budgeting. This doesn’t mean that you have zero money in your bank. It means that income minus expenses equal zero. Income – Expenses = Zero

Ultimately, you allocate every single Rand to a certain category.

First, you will need to work out what your take-home pay is after taxes – what you bring through the door each month. Then list out all your expenses and put a Rand amount to each. This could be rent/mortgage, food, groceries, restaurants, cell phone, insurance, pet care, education and anything else you can think of.

If it is your first time doing a budget, you will need ballpark figures to at least get some numbers down. The best way to do this is to look at the last three months and then average it out.

Once you have done this, you can put it visually somewhere to stay on track.

Some reasons why we find it difficult to budget:

Every month is different:

This is the reality of life.

Things will come up during the month that you forgot about – That is why you should include a miscellaneous category. This is a “catchall” category to cover incidentals that you may have accidentally omitted.

If a certain item comes up multiple times, you may need to create a category for it.

If it is your first time budgeting, keep in mind that it takes 90 days for your budget to work.

No month will be the same, though, and it takes patience and steadfastness to really be comfortable with the dynamics of a budget. With practice, it does become easier and more predictable.

Using your credit cards to pay expenses:

Many people operate pay check to pay check and use their credit cards to pay their bills. This may make it tricky to plan for the month ahead.

To progress from this situation, the idea is to improve your cash flow by saving as much as possible so that you have some buffer.

If you can’t get ahead, then maybe consider that you might have an income problem versus a budgeting problem.

It’s a monthly commitment:

Budgeting can be a draining process because you might not be making significant progress.

It is not exciting or fun, either, because it is revealing problems that you have, such as your income being too low or your lifestyle being too high.

This can sometimes be a hard reality check for some people.

Unfortunately, you can’t ever live above your means and win over the long term.

However, once you get your budget under control, you can start to gain traction and therein, gain control. There is safety in it.

A budget isn’t easy, it can seem tough. Luckily, it becomes a habit the more you do it and the more consistent you are.


How often should you re-evaluate?

It is a good practice to take a cursory look at your investments every 2-3 months. This is to make sure that there are no dramatic changes in either direction.

If your investments are too concentrated, it might also be the right time to have a word with a financial advisor.

The starting point would be a thorough assessment of your assets and liabilities.

This would mean that you articulate your present and future income-generating capacity, income needs, state of health, your family’s health, debts, financial obligations in terms of future educational requirements and maintenance for ex-spouses/elderly parents.

For existing investments, it would also be worth your time to research and talk to a financial advisor about the following concepts on each asset: shortfall risk, risk of inflation, market rise, tax and regulatory risks, liquidity risk and country/political/currency risk.

Generally speaking, young, healthy people at the beginning of their careers and those who have greater wealth in absolute terms can take more investment risk. Whereas the financially fragile would be better off taking less risk. Sometimes you could have amounted a collection of assets that have been unmonitored for many years. These could require assessment and consolidation.

In discussions with an advisor, you will be able to draw up an investment plan. They will also recommend a range of cost-effective products.

Over and above this, you could ask that they assist you in getting your personal affairs, such as drawing up a will, a living will, forming a trust or other legal matters in order.

It is common that post-implementation, most advisors will arrange six-month check-up meetings.

They are also on hand on an ongoing basis and can offer mentoring during volatile markets.

Where do I begin?

Anyone can benefit from drawing up a monthly budget with the direction and support of a financial advisor. They have experience in these matters and can offer insight as an objective observer. They can help you allocate your expenses and investments in such a way that you will get a better return. Once this is in place, protecting your assets and investments in a will is a sensible next step, and they can assist with this, too.

These past few years have meant a lot of change for all of us. One of the best things that you can do for your future self is to have a long, hard look at your financials and do what it takes to have them well under your control. We are here to help with any questions you have. Please feel free to call one of our consultants and they will contact you directly.