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10 common budgeting mistakes

Finance & Money

Posted on Tuesday, April 14, 2020

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Ok, so you’d love to be financially savvy but keep getting side-tracked. Before you know it, you’ve spent more money than you can afford. Things happen and many South Africans find halfway through the month that there’s not much money left, but still a lot of the month left to get through. The good news is that everybody can learn to master their finances. Start by tackling these 10 common budgeting mistakes and you’ll have more cash in your wallet:

 

1. No budget, no buying

Tip one is simple: if you didn’t budget for something – regardless of whether or not it’s on sale – then don’t buy it.

 

2. Wasting stuff

Shrivelled salad, milk that’s gone off and half-eaten supper – we throw away too much food and as a result waste our money. In fact, stats show that one-third of all the food in South Africa, which is worth a whopping R61.5 billion[1] every year, ends up in the rubbish. But it’s not just food waste, it’s also cheap clothing and other items that break or are unwanted because they were badly made. Save money – and the planet – by focusing on quality and buying only what you will consume.

 

3. Living beyond your means

Flashy car, extravagant fashion brands and skyrocketing home repayments; there’s no need for that. Times are tough as it is and we all need to stay within our budgets. Why feel the need to impress others on your own account? It’s all about keeping things real!

 

4. Skimping on insurance

You may think you’re saving by not having insurance, but what if someone crashes into your car, or your home is targeted by burglars or catches fire? That’s why Budget Insurance is the right move, covering your car, home contents, building, business and even your life.

 

5. Sweating the small stuff

Yes, the cost of your daily cappuccino will add up over time. But don’t get so fixated on reducing small expenses that you lose sight of the high fixed costs like your monthly home loan or car payments. The secret is to keep the small costs in check while managing the big costs as your priority. Plus, saving on the smaller day-to-day costs can contribute to long-term financial freedom if you put the money towards paying off larger debts.  

 

6. Not saving

Whether you’re saving for a rainy day, education or retirement, don’t be daunted by the amount that’s required. The sooner you start saving, the more interest you’ll earn. Compound interest is like a snowball, growing bigger and bigger.

 

7. Still doing old-school banking?

Manage your finances better with technology. Use mobile banking apps on your cellphone. Go online to become more financially savvy with savings calculators for big-ticket items or debt repayment, as well as other free tools for financial planning and goal-setting. Set up automatic monthly debit orders to ensure your home loan, car finance and insurance are paid on time. Send part of your income straight into a savings account or investment account, and only then start spending. If your bank has a rewards system, use it to save further.

 

8. Paying with plastic

Swiping your card for payments can help you track your spending, earn you rewards in loyalty points and help with your credit score and home loans. But, and it’s a big ‘but’, that’s only if you have the discipline to settle your accounts before you accrue interest. If you know you can’t be this diligent, then consider going plastic-free and using cash only. The advantage of physically drawing money is being able to visualise how much you can spend. Also, it hurts more to hand over a stash of bank notes than pay with plastic. And when cash is gone, it’s gone. Yes, it’s an archaic life hack, and only you can decide whether going back to cash will improve your finances.

 

9. Ignoring debt

Don’t ignore your creditors or the problem will only get worse. Speak to them if you really can’t afford to settle your debt, and find out how you can restructure it over a longer term. And don’t take out any new loans.

 

10. Not having a budget

Really? The biggest budgeting mistake is not having a budget. Think of it as driving in a strange city without Google Maps or Waze. You may eventually get where you want to be, but it’s so much harder than following a map. Free apps such as 22Seven, Mint or Wally can help you with drawing up – and sticking to – a budget. It’s your road map to financial freedom.

 

The information contained in this article is for information purposes only and does not constitute professional advice.