*** Time to put your January plan into action...

*** Why staying on budget is easier than you think...

*** Get your year off to a great start by setting your finances straight... and more...

From the pen on Karin Iten

Dear Investment Academy reader,

The start of a new year can be tough, so I hope by now you’re slipping back into our routine and have tackled that mound of e-mails sitting in your inbox. Now, unfortunately I can’t help you get through them, but I can help you get your finances in order. That’s why I’ve decided to look a little closer into the 12-step financial programme I gave you at the end of last year.

For those of you who're new to the Investment Academy – or if your brain turned to mush over your well-deserved holiday – here’s a quick recap:

Your month-by-month financial plan

January        : Reconsider your money goals and needs

February       : Recalculate your retirement needs

March           : Check your insurance benefits

April             : Refocus your investment portfolio

May             : Save on tax

June             : Take a break and read a book

July              : Give that portfolio another look

August          : Check your short-term policies

September     : Re-evaluate your estate

November      : Rethink your medical aid

December      : Analyse what you’ve learnt this year

Every month, I’ll spend at least one issue covering the relevant step.

It’s time to put step #1 in place

Let’s face it, coming up with a budget that covers all your costs (and includes a little extra for luxury spending, rainy weather funds and savings) is hard. But it’s not the hardest part. That title goes to the art of staying on budget and you know as well as I do how tricky that can be – especially in January.

My top 10 tips for staying on budget

To help you do just this, I’ve devised ten tips to keep you and your budget on track this year. But, since you’re probably still battling to get on track, I’ll go easy on you today – I’m only going to give you five. You’ll get the other five in Monday’s issue.

Tip #1: Focus on your savings

Once you’ve allocated all the funds to paying off your monthly expenses, determine how much money you can afford to save each month. The trick is to deposit this amount into a separate savings account or rainy day fund at the start of each month – directly after payday. This way, you won’t be tempted to eat into your allocated amount and will be guaranteed to save.

So, set up a debit order with your bank to go off a few days after payday and you’ll never have to worry about your savings again.

Tip #2: Carry cash

One of the best ways to stay on budget is to carry cash.

Now I’m sure you’ve just fallen off your chair. I mean come on, in this day and age, everyone knows how dangerous carrying large wads of cash can be. But I’m not talking about large sums. I’m talking about just enough to cover those every day luxury expenses we waste our money on – like a cup of Mugg & Bean coffee on our way into the office.

Basically, this step requires you to draw enough cash to cover your discretionary expenses (things you can live without) for one week. This way, you’ll know how much you can spend on luxury items, like alcohol, and you won’t be tempted to buy something on special that you can go without. Once the week’s money is gone, you’ll have to wait until next week to buy your favourite magazine or a new box of cigarettes.

Tip #3: Bye-bye bad habits

Bad habits are expensive! So cut down on smoking (or drinking) – better yet, stop all together – and you’ll see your expenses come down dramatically. This means more money can go into saving for a special occasion. Plus, you’ll also benefit from better health, which will see your medical expenses shrink too.

Tip #4: Share the responsibility

Make sure you’re not the only one in your family who’s concerned with staying on budget. This won’t only help you bear the weight on your shoulders, but will probably save you from landing up in couples counselling since one of the key causes of divorce stems from money matters.

Tip #5: Pay down debt

If you have a credit card, you now how hard it can be to pay it off. In fact, sometimes you’re likely to feel that this will never happen. But, the sad fact is that many of us have gotten into the habit of having more than one card. This is a huge mistake. (Look back at Aiden's article from Wednesday - he covered this topic in great depth.)

But don’t despair, help is at hand.

You can simply get ahead by choosing the card with the highest interest rate and paying off as much as you can on this every month. For the other cards, simply pay the minimum balance until you’ve paid off the first card. Once this is done, cut the card up and choose the card with the next highest rate. Pretty soon, you’ll be debt free and only have one credit card to use for emergencies.

There you have it, my top five tips for staying on budget. Remember, I’m not done with this subject yet. On Monday, I’ll give you five more tips to help you from blowing the lid off of your budget.

Till then...

Happy investing and have a great weekend…

Karin Iten
For the Investment Academy