I recently drove ~1500km with only my own thoughts and a few audible books to keep me company; what bliss and a lot of time to solve problems. The one problem that resonates with me is that we usually know exactly what to do, or what not to do, and we still falter.  This leads me to think about decision paths to financial freedom. We all want to be financially free at a certain point in our lives, yet it’s our own behaviours that deprives us from this despite working so hard.

The best start is getting your budget and monthly cashflow healthy, then only can you start making provision for an emergency fund, saving for retirement, and ultimately achieving financial freedom. Start with the basics, having a budget, and sticking to it. Your main thought right about now is that it’s common sense to have a budget, right? It must be common sense given that it takes an average of five days for a middle-income consumer to spend up to 80% of their monthly salary (this means with a disposable income of R30 000 per month, you’ll live on R6 000 for approximately 25 days of the month). Understandably, the biggest expenses are incurred at the start of the month including mortgage and car repayments, insurance and other debit orders.  

When drawing up your budget, keep it simple, practical, and sustainable from the onset. Most Banking Apps have a smart budget tool that automatically tracks and categorises your spending. Why is it important to categorise your spending? It’s only when you start tracking and categorizing your expenses where you’ll realise that it’s not going to increased premiums, fuel or your shopping basket – a big chunk of your money is going to a whole new category called unconscious-spending. Unconscious spending is defined as thoughtless purchases due to convenience or habit. When using a smart app, you’ll not only save time in unpacking your spending, you’ll also gain invaluable insight on your true spending habits and how they change over time. Whichever way you decide to draw up a budget doesn’t matter, as long as it’s effortless and meaningful.

We are all different and each of us spend our money on different things, which are valuable to us. When we need to relook at our spending habits, it’s important that we don’t deprive ourselves from those small pleasures that make us happy. Ensure that your budget is not like a new diet where you’ll cut out all the treats and end up overindulging when you get the chance, leaving you in a worse-off position than when you started.

A big chunk of your money is going to a whole new category called unconscious-spending. Unconscious spending is defined by thoughtless purchases due to convenience or habit.

So, you’ve used your budget tool and you notice you are overspending R 1 500 every month. What now? Easy, you need to spend R 1 500 less every month. The tool will guide you on which category you’re spending too much on and rather than cutting out a whole category (depriving yourself of those pleasures of live), save a little on each category instead. For example.

• I used to have a Cappuccino each workday, this totals to ~R800 a month. I’ve decided only to have a Cappuccino twice a week. This saves me ~R480 p.m.
• Instead of getting take-out once a week, let’s commit to meal planning and get take-out every second week. Saving at least ~R800 p.m.
• Is it necessary to have three online-streaming subscriptions? Let’s cancel one – saving ~R99 p.m.
• Review your cellphone and data contract. You don’t need to upgrade every two years. You could easily save ~R200 p.m. here.

These are ordinary examples, but you get the gist of it. Keep it simple, practical, and sustainable.

Budgeting is the first step towards financial freedom. Talk to us.

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