Why You Need to Create Budget Goals

Budget planing with calculator and pie charts.

The primary purpose of budgeting is setting a goal which will help you get the most use out of your money. Furthermore, budgets help you stay on track and avoid unnecessary expenses.

However, it does not mean that you have to create a complicated and somewhat unattainable goal.

It can be as simple as you want it to be, like saving up for event tickets. Or, something more ambitious – retirement at the age of 50, for example.

Here are some ways you can use your budget to help you get what you have always wanted:

Build savings in case of an emergency

 

Having that extra security blanket is vital if you want to live comfortably. Therefore, you can save your money and build cash reserves which will help you in the hour of need. They should cover three to six months of expenses, and you can use them whenever you want.

Life without worry

Living beyond your means can stress you out, and get you into trouble with your bank.

Just because you are placing everything on your credit card, it does not mean that you are not spending money. And, since you can never be too sure about your current employment, you should try not to spend in advance.

Besides, thinking about your next paycheck is detrimental if you want to fulfill some of your long-term goals.

If you are sharing all costs with your partner, then putting away one paycheck every month will allow you to have more flexibility in the future.

Achieving short-term goals

 

If you want something that might break your budget a little bit, then you could try finding substitutes for other expenses in your life. It could be anything along the lines of not going to dinners so often, and cutting down your grocery bill.

Thinking about your future

You can find apps or calculators that will help you determine how much you should save each month to retire at a certain age. However, they will give you a general estimate, so you could always try a few of them to get a number you are comfortable with.

Then, you can make a certain amount of money a non-negotiable expense and adjust your other needs accordingly.

Save money for fun activities

 

If you focus just on the goals that are fear-motivated, then you are at risk of spending more money. Therefore, treat yourself from time to time to avoid getting too stressed about money.

It does not have to be anything extravagant – a vacation, movie nights, or anything else fun related.

Get out of debts

 

Debts can eat away your savings, so you should pay them off before you invest your money further. Student loans and credit card interest rates are high, so you should not waste any time.

However, other debts, like mortgage and auto loan, have a lower interest rate. Therefore, it is better if you invest some of your money instead of paying them off early.

Dodge unnecessary debts

 

Financing your car can actually make you lose money all year round. So can student loans and buying a home while going into debt. Therefore, try not to spend significant amounts of money on things that might not pay off in the future.

Automatize your savings

BUDGETING word cloud, business concept

Create an automatic transfer of a part of your paycheck to your savings. You can then avoid spending it on useless things which add no value to your life, and save up for long-term goals.

Furthermore, it is best if you choose a different bank to keep your savings – or just transfer the money to your retirement account. Not only will it be harder to take the money out, but it will also take more time. You might change your mind about the intended purchases then, and your savings will stay untouched.

Apps can help you

 

Budgeting apps require you to be responsible. They will track your spending habits, and evaluate how much you are saving. Therefore, you cannot hide anything from them, and there is a slim chance of going over your budget.

 

Picking a Trading Style That is Right For You

When most people think of trading they mostly focus on investing. A slow accrual of wealth over time by holding. This is done by buying and holding stock, investing in mutual funds or ETF and waiting it out. However, this is not the only style of trading out there. So, what do you need to know about different styles?

Time Frame

The first question about your style of trading comes in the form of time frames. You can invest and hold the investment for decades, or, you can trade in a faster pace. Instead of trying to accrue wealth slowly for retirement, you can try enjoying trading profits. They can outperform the buy-and-hold approach, but they also take a lot more effort. Let us delve a bit deeper into different styles of trading.

1. Position Trading

Position trading resembles investing quite a bit. You’ll need a solid broker like Ally Invest. The traders who opt for it will use every analysis tool they have to make decisions. They rely on fundamental analysis to stay in the game. They will follow trends and usually ignore short-term changes. However, while most position traders like to hold their trades for months or even years, some work a bit faster. The main difference between position trading and investments is that an investment is meant to earn money from the fact that the market is on the rise while position traders still plan to use the standard buy low and sell high strategy, but they simply plan it out in longer time periods to maximize their profits.

2. Swing TradingSwing Trading

Swing trading is a very popular style of trading. It combines the best of two worlds. With the use of technical analysis, swing traders will use shorter time frames to profit from market moves. Usually, they will work in terms of weeks or even days. The reason this type of trading is popular is that traders who do not have a lot of time for trading every day can still use it to make a profit. The main idea is to exit a trade when you reach your profit desire, if the trade moved in the wrong direction too much or after the time limit was met.

3. Day Trading

Day trading is a style of trading during which trades are finished during the same day. This means that the trader will both enter the position and exit it on the same trade. With day trading it is not very likely that a single transaction will bring a lot of profit. Instead, day traders will use tick or volume based chart intervals to profit from price fluctuations within a single day. They will follow prices in minutes and rarely hold trades for more than a couple of hours. Unlike investing, day trading is essentially a full-time position. It is a job.

4. Scalp TradingScalp Trading

What do you get when you take day trading to the extreme? Scalp trading. This is the ultimate form of short-term trading. To make a profit, the trader will target the most minuscule price movements and make small gains. However, they will do so frequently and will build a profit every day. As a scalp trader, you will rarely hold a position for more than a minute. However, while the losses are minimal, this style is rather risky. To make a profit you will need a lot of positive trades.

Bonus: High-Frequency Trading

This is a very specific style of trading. To profit from it you will have to use rather complex algorithms. And they are, most of the time, proprietary to certain companies. These algorithms will provide analysis of multiple markets and execute orders themselves based on the conditions they find. When it comes to this style of trading execution speed is everything. For that reason, independent traders cannot really benefit from it.

 

Q1 Update: Stuttering forward

This first quarter of the year has come and gone and it is time again to review how it went. Overall, it has been a rather challenging year so far and I have struggled to maintain balance. The time commitment of my job has been more than I had imagined and it has spilled into other areas of my life.

Goal by goal commentary:

* Pay off $7,000 in Debt

My debt balance has actually increased over the last 3 months to around $7,640. Credit card balances are down, however. I had to borrow some cash for day-to-day expenses as these are more than my income at the moment. As I gain more product accreditations I should be able to pick up on the revenue side and work at the debt balances more aggressively.

Stuttering Forward

* Buy an apartment (mostly) cash

Income from employment has not been up expectations. I will be able to increase my income in the second half of the year to fund this goal.

* Pass CFA Level 3 exam

This is THE most important goal for this time period. The exam is the first weekend in June. Passing the exam will broaden my career options significantly.

* Complete the work experience portfolio to earn the “Certified Financial Planner” designation

I have gained some clients, so expect to be able to use some of the financial plans I am working on as Case Studies for the Portfolio. The first submissions are due at the end of June. Watch this space!

* 10,000 visits per month on MzansiFinance.com

Abandoned for the moment. Employment time commitments are draining my spare time.

* Make the Top 10 of First-year Academy Advisers in Gauteng

Hope to make aggressive strides in this area after June. I did make an appearance in the top 10 countrywide for the number of cases in a week, which I was quite proud of.

* Study Mandarin Chinese up to the Intermediate Level

Abandoned this quarter because of lack of funds and time.

* 3 days of physical activity per week

Down to one day per week at the moment. My fitness has improved dramatically, however. The cricket season has now finished. I fell short of getting a five-for, which I was hoping to complete by the end of the season. Running around on the hockey field again for the winter – a different kind of fitness, but still great for body and soul.

I would definitely not rate this as one of the better quarters I have reported back on here at mzansifinance.com . I expect more balanced progress in my overall yearly goals once I have completed the CFA exam.

How has the first quarter of the year been for you? Have you progressed in your goals for the year? Comments are always welcome.

Kevin Mzansi

2013: Made to Soar!

I hope that everyone had a magnificent Festive Season. The time has again come to let the world know what I am planning to achieve this year. As some of you may know, I publish my Goals every year to hold myself publicly accountable for the Goals I set.Goal To Archive

The theme for this year:
“Why consent to crawl when you have the urge to Soar!” ~ Helen Keller

Financial:

Pay off $7,000 in Debt I really thought that I would have this one crossed off my list by now. I will make a concerted effort to take this weight off my shoulders by the end of the 1st half of 2013.

Buy an apartment (mostly) cash I have been eyeing this goal for many years now. There is just something comforting about having a place that you can call your own. It would also provide a place for my father to stay when he comes to visit. He is retired now, so there is no reason that he shouldn’t be able to show up whenever he wants.

Professional:

Pass the CFA Level 3 exam This is the biggy. I have been in the Chartered Financial Analyst program for quite a few years now. Passing this exam would be the culmination of many years of self-study. I have been mulling over my career options lately and getting through the CFA program would broaden my career options significantly.

Complete my work experience portfolio to earn the “Certified Financial Planner” (CFP) designation. Helping people with their finances is a passion of mine. Completing the work experience component would allow me to market myself as a “Certified Financial Planner” – the Rolls Royce qualification for the Wealth Management/Financial Planning Industry.

10,000 visits per month on MzansiFinance.com This is my real stretch goal for the year – the one goal I do not know how to pull off, yet. It would be quite an achievement if I manage to complete this challenge!

Make the Top 10 of First-year Academy Advisers in Gauteng My financial goals hinge on hitting this mark. I am naturally competitive, so am quite excited by setting such an aggressive work goal .

Personal:

Study Mandarin Chinese up to the Intermediate Level I love learning new languages. This one is pure indulgence.

3 days of physical activity every week There is nothing quite as enjoyable as running around in the fresh air with friends or teammates.

I hope 2013 will be a year of great achievements for you as well.

Which big goals are you setting for yourself this year?

Kevin Mzansi

Reflecting back on 2012

Reflecting backEvery year, between Christmas and New Year, I take some time to reflect on the past year, think about what went well and what did not and set a course for things to come.

For me, 2012 was the Year of “Building for the Future”

My goals from the beginning of the year changed somewhat as I re-focused during the year. I have incorporated both the 1 January 2012 and changed Goals in my analysis:

Financial Goals:
* 6-figure Net worth
* 4-figure Internet Income by December
* $6,000 in debt paid off

Score: 0/3

2012 was a really rough year for me, financially. The Investment returns in my retirement accounts were around 17% for the year, but my leveraged Investment accounts halved in value. This was due partly to some bad calls and partly to having to liquidate positions to keep up with debt payments. I also had a severe cash flow drought the first 9 months of the year, coupled with increased expenditure because of a property fire. I near-abandoned my Internet properties due to work commitments, so Internet income was non-existent.

Professional Goals:
* Complete the academic programs I started
* Continue to “learn my trade” as a Financial Analyst and Financial Planner
* Write and publish 54 articles and 6 guest posts

Score: 2/3

I received a Distinction for the one academic program, but did not pass the other one. This will be a continuing goal in 2013. Time management was a real issue this year. I continued progress in gaining work experience, but I need to be more specific in an outcome in “learning my trade”. On the blogging front, I have exceeded my goal of number of articles, but could have done better, considering 80% of the goal was completed in the first half of the year already.

Personal Goals:
* Find a Ms. Mzansi
* Join a hockey Club and play
* Achieve an “Intermediate” Level in Mandarin Chinese
* Try out Yoga once
* Take 20 wickets in the first half of the cricket season

Score: 1/5

This goal area was a real disaster this year, because of cash flow issues and also bad time management. I did join a hockey club, though, which I enjoyed immensely. I also greatly improved my cricket skill-level and fitness level, although I did not quite reach the 20 wickets I was looking to get. I think the “Yoga” goal was a bit silly to put on a yearly goal list. In 2013 I will put together a monthly list of things to try, to keep life interesting.

All-in-all, a challenging year, but also satisfying in the goals that I did reach. What was I most proud of? I think getting a distinction in the Graduate Diploma in Financial Planning was the highlight, although playing hockey again would also rank up there in satisfaction.

How was 2012 for you?

Kevin Mzansi

My “why” of blogging – rethinking Mzansi Finance

BloggingIt is often said that if the “why” is big enough, the “how” will follow. I have had a really tough time keeping up with my commitments here at Mzansifinance.com over the last couple of months. I set myself quite aggressive goals this year and have fallen short significantly, mostly because of time management challenges.

Why did I create MzansiFinance.com ?
My aims for the blog have been two-fold: To provide a platform for South Africans to talk about financial issues and personally, to learn Internet Marketing and gain some exposure in the Personal Finance community. My aims are still the same, although I’m forced to re-think the “how” of Mzansi Finance.

Competing priorities

The more I think about it, the more I realize that success at growing Mzansi Finance will depend on the amount of time I will be able to allocate to the blog. My Internet goal for this coming year is rather bold: 10,000 visits per month. This would involve a significant time commitment.

My most overarching goal for the first half of the year, however, is not this goal, but rather a time-consuming academic one: passing my June exam. After much thought, I decided that I will aim to spend around 15 hours per week on Mzansi Finance. My aim for the 1st half of the year will therefore be steady, but rather unspectacular growth, consistent with the amount of time I will be able to allocate to the blog.

Do the right things!

I have also realized that I will have to get the most leverage from the little time that I am able do spend on the blog. My first-half year strategy will have three components:

* Interact on Social Media
The only way to grow a community is to interact and connect with people. My daily practice will involve gathering thoughts and comments on topical issues.

* Hootsuite
I have always prided myself on providing useful content to my audience. I will continue gathering great articles from around the web to deliver to followers and subscribers.

* Two quality posts per week
The cornerstone of success at blogging is providing quality content. Up to now I have been very reticent about allowing guest bloggers on Mzansi Finance, mostly because I am worried that the content provided will not be applicable to my audience. I have relented, however and will provide opportunities to guest bloggers, provided the content delivered will be useful to a South African audience.

I will revisit my strategy after June and make the necessary adjustment to attack my 10,000 visits per month goal.

Fellow bloggers: What have been your challenges in publishing a blog?

Kevin Mzansi

Great Expectations! (Q3 update)

Great ExpectationsLife has taken an exciting turn over the last couple of days. Yesterday, I played my first game for the Premier League team at my new cricket club and today I had my first day as a Financial Adviser at my new employer. Exciting times!

Here is a refresher of my goals and my progress up to this point:

Financial:
* 4-figure internet income by December
* $6,000 debt paid off

My academic pursuits have overtaken my other goals for the last couple of months, so I have not made as much progress as I had hoped for. Another 3 months to make it happen!

Professional:
* Pass the CFP Case Study exam
* Gain 6 months of experience as a Financial Adviser
* Write and publish 54 articles and blog posts
* Write and publish 6 guest posts

I will know by early November whether I have passed the Case Study exam, so, fingers crossed until then! Since I started work today, I will only be able to get 3 months of work experience by the end of the year. Still, I’m quite grateful for the start. I have published 25 blog posts so far this half-year, so another 35 in 3 months. A little bit behind, but still on track.

Personal:
* Find a Ms. Mzansi
* Complete Mango Languages Mandarin Chinese course
* Try out yoga once
* Take 20 wickets in the first half of the cricket season

Epic fail on this section so far. I have put in some work on cricket, however. Winter training has gone well and my bowling action is much smoother than before. I hope the work pays off. I took my first wicket yesterday, so 19 more to go.

Who can believe that 3/4 of the year is already gone?! Time for a last push to make 2012 an extraordinary year!

How are your goals for the year progressing? As always, comments are most welcome!

Kevin Mzansi

Where is the money you “saved” on Tuesday?

MoneyWe as South Africans are fond of going out of our way to do things in the spirit of “saving” on expenses. On  Tuesday evening, the petrol price went up by 93c per liter – apparently the single biggest price jump ever. True to form, the petrol stations were packed with eager customers waiting to fill up their vehicles. This got me thinking: when is the saving worth the effort?

Meet Mark:
Mark hears the petrol price will jump by 93c per liter, so he decides to fill up at the petrol station. After waiting in the petrol queue for around 15 minutes, it is his turn to fill up. The petrol attendant fills his car with around 40 liters of petrol. Mark is chuffed – he has saved R40. Waiting in the petrol queue is thirsty work, so he goes into the shop and buys a two liter Coke and a packet of chips. R40 ….

This is exactly what we all do. In the behavioural finance world it is called “mental accounting” – we group separate expenses into separate “mental accounts” without thinking about the big picture.

What can we learn from this?

One impulse buy can undo all the work you have done in saving on items.

It is one thing to watch your expenses and save on purchases whenever you can. It is quite another to have the self-discipline not to spend the money you saved. That 10 rand you saved on one purchase is exactly the same 10 rand you are spending on something stupid.

If you “save” money on a purchase you should go to a bank and deposit the money in a savings account.

Work at turning your “savings” into actual savings. It is no use saving all this money on purchases, but never seeing the results in your bank accounts. “Saving” by purchasing has a better chance of leaving you broke than financially free.

It is more effective to negotiate the big items, than to nickel-and-dime the small ones.

If you purchase a R200,000 car instead of a R220,000 car (or negotiate down to that price) you have just received the equivalent of 2 years worth of petrol for free! Think of how much price comparison you have to do on groceries, for instance, to get to that amount of saving. Fight like hell for a 10% discount on a big-ticket item – it will make a huge difference to your budget.

Saving and frugal living are important components of an overall plan to reach Financial Freedom. Be sure to go at it the right way.

Kevin Mzansi

Time to hit them Goals!

I have decided to take a brief 3-week pause from Mzansi Finance to work on one of my most important goals this year – to pass the Certified Financial Planner (CFP) Case study exam. My exam is on Monday the 17th of September and I will return to my regular Monday, Wednesday and Friday posting schedule at that time. I will still be posting intermittent updates to mzansifinance.com, the Mzansi Finance Facebook page and my Twitter stream (@mzansifinance), so please check in when you have some time.Goal Success

Thank you for all your support and I look forward to returning with the same useful personal finance articles in three weeks time.

Kevin Mzansi

Beware of your own overconfidence when investing

Investing has become a very popular passtime. Stockbrokers have made it ridiculously easy for someone to sign up for a brokerage account and start trading immediately. More often than not, everybody has had the experience of doing their research, picking a stock and have it instantaneously starts rising. The problem is that we immediately start inferring that we must have some skill in our stock picking. What makes us jump at this conclusion so easily?Investing

You very rarely hear a “weekend warrior” investor say “my stock is only going up because the economy is doing well”. More often you will hear: “I just knew it was a good stock!”. If things go badly, you hear: “it is going down because the economy is bad”, rather than: “I was wrong”. This phenomenon is called “self-attribution bias” – taking personal credit for wins, but attributing losses to factors outside of our control. The stock markets are unpredictable. Self-attributing successes is a natural step to gain confidence in our investing abilities.

We are also susceptible to “Hindsight bias”. This means, if the stock does well, we say: “I knew it all along!”. This makes us even more confident in our abilities.

The terminal step is “the illusion of control”. “Illusion of control” is the tendency to think we can control the uncontrollable. We think: “The stock has gone up, therefore our information and logic are correct!” More confidence! Unfortunately, no matter how good we are, there are always situations in the business environment that cannot be forecast. No matter how much information you gather and complexity you add to your forecasting model, you can still be wrong.

Combine these three factors and we are ready to give Warren Buffett a run for his money. We start taking increasing risks and essentially gamble with our hard-earned money.

How do we control these biases?

The first step is to write down why you made any investment decision and all the ways you could be right or wrong in your reasoning. This will give you the ability to look at the investment process logically and make you aware of any reasoning before the fact, rather than in hindsight. In time you will be reminded by Mr.Market that there are many things outside your control and sometimes you are just plain wrong.

Investing is one of the most difficult disciplines to master. The trick in improving as an investor is to look at investment decisions logically and remove as much emotion as possible out of your decision-making.

Kevin Mzansi