Make your own bud­get

Financial Mail - Investors Monthly - - Budget 2017 -

Fi­nance min­is­ter Pravin Gord­han’s 2017 bud­get will go down in his­tory as one of the most crit­i­cal bud­gets for SA, given the tough eco­nomic and po­lit­i­cal en­vi­ron­ment, lo­cally and glob­ally.

With in­suf­fi­cient fi­nan­cial re­sources to meet all its re­quire­ments, but in­creased de­mand for sub­si­dies and bet­ter liv­ing stan­dards, gov­ern­ment faces the tough task of bal­anc­ing the needs of its con­stituency with the loom­ing threat of zero growth, a rat­ings down­grade and dis­in­ter­ested for­eign in­vestors.

Now is an op­por­tune time to take stock of your per­sonal bud­get. How will the na­tional bud­get af­fect your ex­pen­di­ture? Will you pay more for food, ed­u­ca­tion and ba­sic ser­vices? Will you ben­e­fit from tax breaks? Can you pro­tect and grow your sav­ings?

Just as Gord­han sur­rounds him­self with ex­perts to draw up the na­tional bud­get, in­di­vid­u­als should seek ex­pert ad­vice to cre­ate a well-for­mu­lated bud­get as the first step to fi­nan­cial well­ness. Fi­nan­cial well­ness means be­ing able to sus­tain­ably cover planned as well as un­fore­seen ex­penses.

Research shows that peo­ple with bud­gets are more likely to be fi­nan­cially healthy. Once you un­der­stand how and why you spend money, you can set fi­nan­cial goals.

Mo­men­tum rec­om­mends a four-step process. First, know where you spend your money. This will help iden­tify ar­eas where you could save. Sec­ond, keep track of your ex­pen­di­ture and en­sure you are within your bud­get lim­its.

Third, be dis­ci­plined about man­ag­ing your money and make wise de­ci­sions daily that save money while keep­ing your bud­get on track.

Lastly, look for op­por­tu­ni­ties to free up money to save for your life­time goals and en­sure fi­nan­cial well­ness.

Sim­i­larly, Gord­han has drawn up a list of SA’s in­come and ex­pen­di­ture. He will have sought ways to in­crease in­come through cost-cut­ting mea­sures or higher taxes. Then he will have ap­plied any avail­able funds af­ter ex­pen­di­ture to meet SA’s wish-list of fi­nan­cial needs and goals.

A per­sonal bud­get can be for­mu­lated us­ing spread­sheet soft­ware, to­gether with an anal­y­sis of your bank ac­counts. Mo­men­tum is in­vest­ing in dig­i­tal plat­forms to give clients the tools to man­age their bud­gets.

On­line tools such a Myfin­track on mo­men­ help cat­e­gorise and track daily spend­ing. Fi­nan­cial ad­vis­ers also of­fer bud­get­ing and fi­nan­cial plan­ning ad­vice.

The ex­pense of face-to-face fi­nan­cial ad­vice, as well as the min­i­mum in­vestable in­come re­quired, leaves many lower- and mid­dle-in­come earn­ers un­able to af­ford wealth man­age­ment ad­vice. With lower fees and in­vest­ment min­i­mums, dig­i­tal ad­vice of­fers an op­por­tu­nity to nar­row the fi­nan­cial ad­vice gap.

By sim­ply us­ing a mo­bile phone, clients can ob­tain ad­vice tai­lored to their cur­rent needs and long-term goals.

Dig­i­tal ad­vice ap­peals to cost-con­scious in­vestors as well as those who do not need face-to-face ad­vice for all their in­vest­ment needs. Given the com­pound­ing ef­fect of in­ter­est, even a small cut in fees can make a big dif­fer­ence to the long-term value of an in­vest­ment.

For most clients, blend­ing dig­i­tal with face-to-face ad­vice pro­vides the op­ti­mal bal­ance be­tween trust­wor­thy fi­nan­cial ad­vice and the most af­ford­able rates. De­spite the ap­peal of cost-ef­fec­tive dig­i­tal ad­vice, when it comes to com­plex mat­ters such as trusts, tax­a­tion and es­tate plan­ning, we rec­om­mend con­sult­ing a rep­utable fi­nan­cial ad­viser.

Which­ever route you take, use the op­por­tu­nity of the na­tional bud­get to re­flect on past fi­nan­cial suc­cesses and mis­takes, mea­sure your cur­rent fi­nan­cial well­ness and re­assess your fi­nan­cial and lifestyle goals.

When SA re­vises its bud­get and sets fi­nan­cial goals, so should you

De Waal is CEO of @scranston Mo­men­tum Re­tail

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