AS YOU cruise into the second half of 2012, it is important to remember that like a soccer match, the results of your financial plan depend mainly on what happens in the second half. The half time break was a crucial opportunity to review exactly what went wrong and reinforce what is going right.
If you scored a number of brilliant goals in the first half, then it is a foregone conclusion that your 2012 outcome will be triumphant. However, if you fluffed most of your chances in the first half like many of us, then it is important to make the second half count.
Taking the soccer analogy further, no matter how many goals you conceded in the first half, there is still a chance to equalise and win the game in the second half.
There is a biblical teaching in Songs of Solomon 2 verse 15 which says “catch for us the foxes, the little foxes that ruin the vineyards”. Many of us are really mindful of the major goals but the ‘little foxes’ are our personal ‘pet expenses’ that we water, justify and continually draw down our budgets and sap power out of our long term goals.
If you have been winning with your financial plan in the first half, well done, but the second half is not for you to relax. It is useful to track what you spend each week preferably putting each expense in a category so that you can quickly see which areas of your life cost you the most money.
The best form of defence of your financial position is proactively attacking those expenses that disrupt your plan. Being in control of your finances means you have the money necessary to pay for bills on time and for the things you really need when the time comes.
When I worked in the manufacturing industry back in Harare in the 1990s, we had a programme we called preventative maintenance. This was essentially used to pre-empt breakdowns in essential equipment. For all the key equipment we had in the company, we would draw out an estimation of the life span of the vital replaceable parts and plot them on a chart.
Since we had equipment from as far as Japan, we would order the consumables and replaceable parts before they were required. Procuring these essential supplies from outside the country usually took more than two months to arrive at the factory gate. This planning ensured that we generally would never had down time due to these replaceable parts.
Some of the little foxes that can sneak in your financial plan are bills associated with your car. Most of us budget for fuel every month but few of us budget for essential service and maintenance. We forget tyres need to be periodically replaced. A car must of necessity go to the garage not because it has broken down but because it is due for service.
The most important aspect of any financial plan is you. To earn a living, you have to be healthy and sharp. Investing in your personal health is one of the keys to a successful financial plan. A number of us tend to relegate health to the periphery. We eat badly, particularly junk food, and we hardly lift a finger to exercise.
A preventative maintenance plan at personal health level would be to ensure we pursue a healthy lifestyle so as to minimise chances of downtime due to health causes. It is the same reason we schedule visits to the dentist to get the teeth checked periodically rather than wait to visit to get them pulled off.
By getting rid of the little foxes, you increase your focus and awareness of your goals. Taking control of finances is vital, especially in an uncertain economic climate pushed to the brink mainly by EU based countries. Making your financial plan work takes a sound knowledge of where your money is going each month and persistence.
We thank the accountants for inventing the budget. A budget is supposed to help you plan your finances by recording all future income and the related expenses. Budgeting doesn’t mean deprivation, just finding ways to save money on things you won’t really miss anyway.
In its simplest form, a budget is just three columns which show the budgeted items in one column, the actual for that month in the next and the variance in the last. Accountants have taught us that if a variance goes beyond 20%, then it must be looked at and explained.
Make sure you consider home maintenance costs, extended family support, home visit costs and everything else you may need to pay even if it is monthly bill. Budgeting is a proactive approach to managing your money and should cover all your saving, borrowing and spending plans.
You may not realise it, but your spending pattern says a lot about you. If a complete stranger were to view your latest spending decisions, he or she would be able to get an idea about what you value, and generally who you are. A financial plan is your itinerary for your financial journey and you have to take care of some operational issues to ensure arrival at the intended destination.
The full 2012 is a summation of activities we packed into the 12 months making the year. You cannot leave it to chance or to the vagaries of what happens in the global economy. You acknowledge the economic environment you are in but you take full account of your own results.
Tafirenyika L. Makunike is the chairman and founder of Nepachem cc (www.nepachem.co.za), an enterprise development and consulting company. He writes in his personal capacity