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Balancing the books….

I meet people everyday who struggle to make ends meet.  They seem to face a never ending stream of financial issues and seem unable to resolve them.  When they eventually open up to me I start to see a common thread. Everyone of them appears to live to their max in terms of income stream.

They accumulate as much as their income will allow.  They purchase with scant regard for their future. Let me quickly add, that by their future I am not talking about retirement.  I am talking about the coming weeks and months. They seem to completely ignore the fact that there is an immediate future,let alone a retirement. They buy stuff as if their very lives depended on it.

I am not advocating that they should not buy stuff. After all what is earning a wage if you cannot at least enjoy some of the benefits.   I am advising though that part of your spending be channelled towards the future. If you want to purchase something of high value, don’t buy it until you can at least pay some of it off with the first payment. This will actually give you a greater sense of enjoyment.

I understand that all purchases are not able to be made in this fashion, but certainly the way some people spend money they are not evening considering this option. They incur huge debt burdens and these begin to weigh them down.  Typically these folks, as with the rest of us, have every intention of meeting the demands of the four credit cards, the bond, car repayment, school fees, clothing, food and the rest. They simply though have more debt than they have income.

This debt will kill them. If not physically, it will erode their mental health and cause massive problems.

My message really lies in the title of this post. Try and balance the books each month. You need to live on what you earn, and plan to spend on the bigger items. I think that debt is a good thing, if it is properly managed. Don’t stop living or desiring something because you cannot afford it in a once off payment, but make sure that you can really afford the repayments. 

As a rule we try to manage our family of 90% of our income.  This leaves us with 10% to balance our lives with. Our goal is not to spend the 10% every month. In fact this goes into our bond, which is already being paid of at a level higher than what the bank demands. We then draw down for special purchases.

So I think that debt is good, but ensuring that you can afford the debt is of parmount importance. If you battle to manage your finances then you need to seek advice. Surround yourself with people who can support your decision. True people who can actually tell you “no!” If you don’t agree with them the chances are you really cannot afford it.

With the petrol price coming down this month, put the addition R80.00 you will generate into your bond!

Have fun out there!