YOU SHOULD BE ABLE TO LIVE ON HALF YOUR SALARY
…the rest be used on savings and luxuries
If the working class lived within their means, half their salaries would be enough to cover rent, food, transportation and other day to day expenses.
This is according to the Micro Finance Unit (MFU) which is trying to inculcate learning of financial issues.
MFU Research and Information Officer Phumzile Nhleko-Mtetwa said budgeting should take precedence in debt management in order for people to realise the full potential of their earnings.
She said it was unfortunate that lifestyle changes dragged people deeper into debt whenever they get increases in their earnings resulting in failure to live within the means that could be provided if a person took stock of their earnings and realistically lived on them.
Speaking during a telephonic interview this past week, Nhleko Mtetwa said they encouraged people to embrace changes which call for using only 50 per cent of their earnings to cover all essential spending which encompass only needs and not frivolous wants.
She said it was disheartening to note how after earnings increase, the advantage is felt for only one month and thereafter, the cycle of running short of money returns.
“The second month after an increase in earnings feels as though there has been no change,” she said adding how this was brought about by additions to spending that were not properly quantified and thus overburdening a person.
“You find that a person used to do the simplest of hairstyles but due to the increase in earnings, opts for more expensive changes and not putting into account that such eats into a huge chunk of the increase, if not all of it.”
She said it called for one to take stock of what they spend their money on, soberly, before making necessary changes.
“Budgeting is the core of savings, people need to plan.”
She said people usually started spending even before planning and at the end of the day failed to pay for their bills.“By doing this, most of the money gets spent on wants because of attractive sales before their needs. When expenses become higher than the income earned, that’s when problems of indebtedness start,” she said.
Nhleko-Mtetwa said living within means called for one to have savings after expenses at all times as this creates financial freedom. “A person who earns E6 000 but has expenses in the excess of E8 000 should know that they are living in debt,” she said.
Cautioning, she said savings were a buffer that one could use in the event there were ensuing emergencies.
She said types of savings included funeral insurance which could be used for extended family members.
“You know that there are extended family members at home who have no means. So saving that extra E25 with a funeral insurance will serve as buffer in the event they die,” she said, adding how unforeseen tragedies usually happened when one was not in a financial position to meet them.
“Where will you get money to bury a family member in the absence of funeral insurance?” she asked adding that in such cases, a person would have to then borrow money to meet such expenses.
She said it was unfortunate that once money has been borrowed, it would have to eat into the next month’s earnings thus reducing what can be spent on essentials.
MFU Research and Information Officer Phumzile Nhleko-Mtetwa.