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Everyone wants to enjoy their golden years- a time when you can reflect on all your accomplishments and reap the rewards of all your years of hard work. However, for many pensioners this is not case. Research conducted by the Financial Services Board shows that 13% of South Africans have to continue working after their retirement while 10% are dependent on friends and family.
This is mainly because monthly pension pay-outs are less than the salary earned while employed and as a result pension pay-outs may not keep pace with the cost of living. You may or may not be one of these pensioners but whatever your situation understanding money management is crucial. You may not be able to control inflation and the increase in the cost of living but you can control your spending. Making sure you manage your money effectively is vital to ensuring your hard earned pension covers your needs and wants for the remainder of your life and this starts with budgeting.
A budget is a detailed plan of how you are going to spend your income (your pension, grants, income from investments etc) and includes all your expenses. Before you start with your budget you need to list all your needs and wants. ‘Needs’ are those things you cannot live without like food, clothing shelter, electricity (power), transport, medical etc. ‘Wants’ are those things are those nice-to-haves like take-aways, a fancier house, designer clothing etc. Always start with paying for your needs, then saving and then when your needs and savings are taken care of look at satisfying your wants.
1. Add your monthly income from all sources together
2. Add all your monthly expenses together
3. Compare income and expenses to determine if you are overspending, under spending or breaking even
4. Save any money left
5. Plan to reduce or eliminate any overspending
6. Plan ahead
7. ALWAYS BE HONEST AND STICK TO YOUR BUDGET!
Should you be overspending it is vital to balance your budget as soon as you can. This includes relooking at where you are spending. Are all your needs actual needs or are they things you think you need? Look at where it is possible to cut back-perhaps reviewing shopping habits such as changing supermarkets or buying in bulk with other family members and splitting the costs. Look at your funeral polices- how many do you have? You only need one and make sure it is with an authorised financial services provider.
After all your years of hard work it is now time to enjoy life at your own pace, simply by drawing up a monthly budget and sticking to it you are on your way to an enjoyable retirement.
Written by: Tammy Peyper
Manager: Consumer Education Department, Financial Services Board