In the Budgeting Basics lesson, we saw that after deductions and expenses, there isn’t very much left at the end of the month.
Part of budgeting is setting your financial goals for the future. This isn’t difficult, but you need to be S.M.A.R.T. about it!
Maria has started a new job that is further away from her house than her previous job. Public transport to and from her new work wastes two hours a day and isn’t reliable. Being late for work is not an option! Maria decides she needs to fix her situation and buy a car. She applied for a loan, but could only get R130 000, but the car she needs to buy costs R160 000.
Let’s apply the S.M.A.R.T. system to Maria’s situation:
pecific: define what you are saving towards and how much you need.
- Maria needs to save R30 000 to buy a car worth R160 000 – remember she has R130 000 already from the car financing company.
easurable: have a way to measure your savings.
- She set up a bank account separate to her daily account. This way she can track the balance every month.
ttainable: make sure you are being realistic.
- Although Maria needs the car soon, putting aside R10 000 a month for only 3 months isn’t realistic.
- If she cuts back on a few things, Maria decided she could save R2500 a month for the next 12 months – this is attainable for Maria.
elevant: ask yourself if your goals are relevant and important to your life.
- Buying a car is a serious purchase; but it would make Maria’s life easier and provide job security (by not being late to work and getting fired).
imeline: set up a clear timeline for the period you want to save.
- Related to how attainable saving is, Maria knows that 1 year is a realistic time for her to save.
Having a plan to save ensures that Maria will achieve her goal. For the next year, Maria needs to make sure to work the amount she wants to save into her budget. To make things easier she could setup an autopayment at her bank to transfer the money.
Like Maria, you can apply this method to anything you need to save for, whether short-term, e.g. a laptop, or long-term, e.g. retirement.
Be responsible with your finances and visit www.mycreditcheck.co.za to get a list of your accounts and balances on your full credit report.