{"id":4089,"date":"2021-01-02T13:29:13","date_gmt":"2021-01-02T13:29:13","guid":{"rendered":"https:\/\/thefinanceghost.com\/?p=4089"},"modified":"2021-01-02T13:29:13","modified_gmt":"2021-01-02T13:29:13","slug":"how-i-manage-my-personal-finances","status":"publish","type":"post","link":"https:\/\/thefinanceghost.com\/index.php\/2021\/01\/02\/how-i-manage-my-personal-finances\/","title":{"rendered":"How I manage my personal finances"},"content":{"rendered":"

A<\/span>lthough this isn\u2019t a personal finance platform, I suppose it doesn\u2019t help to learn about investing and business strategy if you don\u2019t have any money available to invest.<\/p>\n

With that in mind, I decided to share the basics of how I manage my personal finances. Perhaps some of this will be helpful to you on your journey to financial freedom.<\/p>\n

If I make it too fancy, I\u2019ll stop<\/h4>\n

It\u2019s all good and well to build an elaborate and complicated spreadsheet that I hope to update every week or every month.<\/p>\n

Will it happen? Probably not. Life gets in the way.<\/p>\n

I take a practical approach with this. It\u2019s important to regularly check where my money is going, but it\u2019s unlikely that my lifestyle will change drastically from month to month.<\/p>\n

The one exception is having a baby \u2013 Baby Ghost warranted an entire rework of my budget!<\/p>\n

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Getting a solid baseline for the household budget<\/h4>\n

This may sound counterintuitive, but I believe that putting everything through my credit card helps me manage my money. This only applies if I settle my credit card every month (this is critical \u2013 I don\u2019t allow the credit card companies to hurt me with huge interest rates!)<\/p>\n

If I withdraw cash at ATMs and spend it all over the show, I cannot possibly track where my money is going. There will be a black hole in my budget that money disappears into without a trace. With a credit card, I can use my monthly statement to see exactly where my money went.<\/p>\n

I have a proper rewards programme linked to it, so I take advantage of that as well. A very well-managed credit card works for me financially, but I have to be disciplined.<\/p>\n

I take my credit card statements and look at where I am spending my money. I group it into sensible areas like \u201cgroceries\u201d or \u201crestaurants\u201d or \u201cpersonal care\u201d and I work out an average for at least three months to avoid short-term fluctuations.<\/p>\n

There are clever apps available in the market to make this easier. Depending on who you bank with, your online banking may also have budgeting tools that help analyse your statements. I bank with Investec and thankfully the functionality is all included in my online banking.<\/p>\n

The magic number: monthly growth in personal equity<\/h4>\n

I think of myself as a company. Every month, I earn money and spend it. If I earn more than I spend, I can increase my \u201cequity\u201d i.e. what I am worth on paper.<\/p>\n

For example, if I earned R30k per month and spent R22k per month, then my equity would increase by R8k per month. This assumes that I stick to my budget every month of course!<\/p>\n

Armed with this knowledge, I could decide what to do with the R8k. Having adequate insurance and emergency funds is important. Beyond that, tax free savings accounts come into play. Once that is exhausted, things really get interesting with investment options.<\/p>\n

As ever, it\u2019s best to discuss this with a financial advisor.<\/p>\n

Setting an annual target<\/h4>\n

I do a few weird things when it comes to my money. I\u2019ve never been shy to be unorthodox in my approach, nor have I claimed otherwise.<\/p>\n

For example, I don\u2019t include any household items or cars in my assets. Literally, zero value. If we buy a couch, it\u2019s worthless in my eyes. If we buy a car, it\u2019s worthless on day one.<\/p>\n

When I calculate my personal equity, the only assets I allow are:<\/p>\n