Wednesday, 08 February 2012 - 20:00

 

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Treasure Hunting

There was a point in my life when I wanted to be a pirate. I wanted the sword, the parrot, and the treasure at the end of the treacherous journey. The starting point of any heroic quest to a lost buried treasure starts with a treasure map. My pirate career never really took off, but I never stopped looking for a map that would lead me to the treasure.

A budget can be seen as a modern day version of a treasure map. Both are hard to follow, but if followed can lead you to a treasure. Starting a budget for you or your household can be seen as finding a treasure map.

The first step to draw up a budget is to know your income and how it is spent. One way to see how you are spending your money is to go through your bank statements and savings account. From there you will be able to find out what you spend your money on and what your monthly total is.

The second step is to make a list of all the expenses that you would expect to have during a month. You need to split the list into fixed and variable expenses. Fixed expenses occur monthly and are relatively stable and include items such as mortgage/rent, car payments, levies, and medical aid. Variable expenses by their nature are more volatile and are where most of the lost treasure is hiding. Some examples of variable expenses include groceries, petrol, clothing, cellphone bills, eating out and holidays.

From the list of your expenses you will be able to see how much you spend in a month versus your monthly income. If your income is more than what you are spending then you’re already on the right path to financial freedom (the treasure). You should also make sure that you include a savings portion in your budget to save for a rainy day.

If your expenses are more than your income you have two options. Either you will need to increase your income or cut back on your spending. In the short term it is usually easier cut back on spending than it is to increase your income.

Expenses can also be grouped into necessities, comforts, and luxuries. The necessities are goods/services you can’t live without – the things that you need to survive. Comforts make living easier such as smartphones and buying food from Woollies. We all know what luxuries are: designer clothing, the newest gadgets, expensive holidays, etc. Your money should first be allocated to necessities, then comforts, and any leftover can be spent on luxuries.

With a completed map in hand you can start the journey to the ‘X on the map’ – financial freedom. However, you also need a compass to keep you from straying off course. In the technological era there’s no need for outdated compasses. Applications (apps) that you can use to easily track your daily spending can be downloaded onto most smartphones. These will help ensure you don’t get lost in the ‘jungle of overspending’ or the ‘swamps of impulse buys’. Naturally the pen and paper system also works, but will take a bit more effort.

You now have the completed map, the way forward, and the means to keep you on the path to the coveted treasure. The road might be treacherous, but the reward in the end (financial freedom) is worth the adventure.

Kind regards,

Gerbrandt Kruger
info@seedinvestments.co.za
www.seedinvestments.co.za
021 9144 966

Wed, 08 Feb 2012

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