Change your Money Mind

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Changing entrenched spending patterns

Often the biggest gap between getting by and accumulating real wealth – irrespective of what you earn – is the gap between your ears. It is a small gap, and it is often very difficult to forge a new path, and stop the steady trickle of money out of your pockets.

One of the reasons for this is that change of any sort is deeply uncomfortable. If you want your New Year’s resolutions to be more than January’s to do list, then start thinking about wealth differently.

We all work hard for our money, so changing spending habits is almost always is seen as a sacrifice. It’s not unlike trying to lose weight or quitting smoking, it has that nasty emotion attached that you’re going to have to do without. It is complicated by the fact that you can’t stop doing it altogether (not unlike eating) so it’s not as though you can go cold turkey and tough it out like smoking or drinking.

The good news is that your brain is easier to reprogram than your think, especially if you’re gentle on yourself. Lack of a savings culture pervades every aspect of our society, and continues to erode. The old fashioned values of waiting until you can afford it has gradually been replaced by ‘have now, pay later’, aided and abetted by the advertising industry and financial institutions. The only difference between a CEO who doesn’t live hand-to-mouth and accidently has some money left at the end of the month and one who doesn’t, is ‘living within your means’ 0 whatever your ‘means’ are. How much should you be putting into savings each month? Ask your financial advisor to do a financial plan ( or update an old one), but as a rule of thumb, about 15% to retirement savings and another 10% in other investments (over and above the requisite 3 month rainy day fund). Most South Africans put away a small fraction of this. If they are putting 15% into compulsory pension savings, this is usually withdrawn as cash when they move jobs – in 97% of the cases!

If your money runs out before the month does, it’s time to take a hard look at your finances, even if it for the first and last time this year. Don’t cheat! Draw up a budget of what you think your expenses are, then go back to 3 months statements and find out what you’re actually spending. With the silly season just behind us with gifts and holidays to account for, this is a good time – those expenses need to be added to your annual budget. Find the hole in your money bucket. Do a post mortem. It could be a lot of small expenses or several large ones – it could well be another member of the family that needs to be reined in.

Now that your post mortem has found where the disease lies – be careful how you cut it out. If an ‘indulgence’ like DSTV premium is you and your family’s major source of entertainment – why throw it out? Look for easier sacrifices (pity there are no decent alternatives, but too bad!). Gym membership that hardly ever gets used? Cancel it (you can get your loyalty points other ways, ask your advisor), put on your takkies and walk instead. Eat out several times a week? This can add up to thousands of rand – learn how to cook, and I mean really cook! Try two new recipes a week, make it an event. Who still does the good-old Sunday lunch anymore? Time for new traditions. If you have a certain weakness, perhaps retail therapy, or shoes, or books, or gadgets – take your monthly allowance for that out in cash. Sometimes the mere change from handing over your card to handing over the folding stuff can make you think again.

Actions: Call your me and update your financial plan, open a savings pocket, post mortem your expenses.

Author Dawn Ridler  

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