What do you value most in life?
Each one of us is different and we each value things differently. The thing we have in common is that we all have things that we want to achieve more than anything else. These are the personal ambitions that we think about all the time.
It could be that European trip you’ve always dreamed of, or that course you’ve been wanting to take. It could be the house that you want to buy for your family, or a deposit you need for that amazing car you want to buy.
It could be a pesky credit card or clothing account you want to pay off, or that university fund that you want to start for your child.
There are no right and wrong answers when it comes to your personal goals. They are personal. They belong to you and no one can take them away from you. They are big. They are bold. They are adventurous and they will cost you some amount.
Life happens though, and these things that we really want to do get put on the back burner. Often we’ll get to the end of the month and there will be more month left than money. No money left over to save towards our goals.
So we trudge on and the cycle repeats itself. We promise ourselves that we will do something to make our dreams happen, but our hopes are dashed in a pile of invoices and receipts.
There is a simple system that can help us achieve our goals: Goal based saving.
We put our savings goal first, and then spend what’s left.
Often we front load our month with spending and then have nothing left to provide for our goals. With goals based budgeting we provide for our goal first and then make things work with the rest of what we have.
Here are some guidelines
Calculate Gross Salary – Deductions (Retirement, Medical Aid, Tax) first. This will give you your Net Salary.
Take at least 20% of our net salary for our goals.
Spend at most 80% of our net salary for everything else.
The minimum of 20% for our goals needs to be done automatically as a debit order. The salary hits our bank account and 20% immediately gets put away in a separate account or an investment. That 20% has a job to do, for us, and it doesn’t want us to get in its way, making excuses, hesitating and procrastinating. In and out of our
account before we know it and shoulder to the wheel. That is what that 20% is all about.
The bottom line
Is it going to be easy? No. But, one day, when we’ve achieved the things that matter the most to us in life, we’ll look back fondly on our struggles making things work every month with at most 80% of our net salary and smile.
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The content in this article is wholly owned by the Verso Group of Companies. Companies in the Verso Group are authorised Financial Services Providers.