Make or revise your budget
If you do not already have a budget, now is the time to draw up one. Budgeting may be a chore, but it is also the most powerful tool you have to manage your money and ensure you stay out of debt and start building some wealth. A budget will help you to see where you are spending your money and whether you are living within your means.
If you are spending more than you earn, you can use a budget to identify where you can cut your expenses to ensure that you stay out of debt.
A budget can also help you to identify how much you can afford to save each month, and saving will help you to grow your money. Then you will be able to afford more than you would if you bought on credit.
When you save, your money works for you, earning interest or growth that you can enjoy. When you buy on credit, you pay interest on your borrowings to a bank, a shop or the finance house that lent you the money. In the end, you will pay much more than the initial price – possibly twice or three times as much – once all the interest has been added to the initial price.
If you have already discovered that budgeting is the best way to control your finances, the start of the new year is a good time to review your budget.
Perhaps you have run up a lot of debt over the festive season and need to make provision in your budget to pay off that debt as quickly as possible. You may also have to provide for increases in policy premiums, such as your life and disability cover or your retirement annuity if it has an annual increase, and for increases in the likes of school fees, gym memberships or medical scheme contributions.