…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.

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