Recently in Budgeting Category

Yesterday saw the presentation by Finance Minister Pravin Gordhan of the annual budget speech.

What does this mean for you and I?  

Any budget is about balancing the amount of money that comes in with the amount of money that goes out.  Increase what goes out (“creating jobs, reducing poverty, building infrastructure and expanding our economy”) and you must either increase what comes in (taxes) or borrow (deficit). 

Minister Gordhan’s challenge was to increase spending (we all want more money spent on education and healthcare) while decreasing our tax burden – oh yes, we are not too keen on the idea of borrowing money either….how has this been achieved?

 I recently returned from a 2 week bicycle adventure where we cycled from Howick in Kwa Zulu Natal to Cape Town.  While the 1878 kilometers proved challenging at times, it was the people that made a tremendous impact.

One particular farmer on the edge of the Karoo showed us how things should be done.  

It is great to see that an additional R12.2 billion will be spent on child support grants, and an extra R15.1 billion for teachers (that could be nine or twelve zeros for a billion - nine I presume) but what does that mean to me and you.  R12.2 billion sounds much better than an in increase of 4.17% or R10 per month for each child support grant - not even keeping up with inflation!

Today is the beginning of the rest of your life – it is also the end of your past, a chance to start fresh. This applies as much to your financial governance, your tax affairs, and indeed your life.

Personal finance may appear simply to be about numbers, where you have to spend less than you earn, where you have to save a bit for a rainy day, and where you have to use your credit card sparingly; but I am convinced that personal finance is often more about psychology than it is about mathematics.

Everyone knows that you have to spend less than you earn but, as someone once suggested, it’s very much like one’s physical health, where we all know what we are supposed to do, we just have great difficulty doing it. In fact, running your finances compares well with losing weight. In theory, it is easy, but in practice it can be extraordinarily difficult. For weight loss, all you have to do is eat a balanced diet and exercise, and to be healthy financially you just have to spend less than you earn.

Jesus teaches that we should not store our treasure on earth, but store our treasure in heaven. "For where your treasure is, there your heart will be also" Matthew 6:19. How do we reconcile this with Solomon's wisdom concerning the wise storing choice food and oil quoted in part 1?

1. Understanding the nature of your costs

There are a number of good books and courses on costing some of which may take years to complete. The intention here is not to turn you into a costing expert but to help you put a practical and useful budget together. If you need a more technical document or model, you would be well advised to contact a professional.

In developing your business, it is vital that you know where you want to go and how you plan on getting there - your vision or purpose and strategic plan. This plan will include amongst other things, the financial implications of what you plan to do - what it will cost you and what income you anticipate it will generate. The estimating of these costs and income is your budget or financial plan.