How to plug the leaky bucket

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Where did my money go? If that’s a question you ask yourself too often, then you have a leaky bucket that needs urgent fixing.

Here’s a story to explain the principle.

Hilda is a website designer who works on freelancer basis for three different agencies, four days a week. She helps support her brother, sister-in-law and nephew. She has no debt and believes that she is frugal with her money.

Yet, Hilda never seems to have money. To make ends meet, she either needs another job, or her current clients must pay her more.

One day, a friend offers Hilda help with managing her money. Hilda jumps at the opportunity and the two of them sit down for their first money discussion.

“Let’s start with your budget,” the friend says.

‘I don’t have a budget,” Hilda replies.

“How much do you earn every month?” the friend asks.

“I don’t know,” Hilda replies.

So they start by writing down the names of the agencies Hilda works with and how much each of them pays her. They add the three amounts together, and Hilda is amazed to see the total. She did not think that she earned that much.

“How much do you spend every month?” the friend asks.

“I don’t know,” Hilda says.

She does know, however, how much her transport costs per day, how much she gives to her brother, and how much she spends on airtime, a funeral policy and her nephew’s school fees.

So the friends write it all down, and then agree on amounts for food, weekend transport, going out, and so on, to include in the budget. They add it all up and again Hilda is amazed to see that she spends less every month than what she earns.

“Where does the other money go?” the friend asks.

“I don’t know,” Hilda replies.

Hilda doesn’t know because she did not realise that she had a leaky bucket in her life.

Over the next few months, Hilda starts keeping account of all the money she spends – right down to the R2 she pays for a vetkoek from the lady on the street corner.

Through her record keeping, the leaks in her money bucket become visible. Her brother who asks for R50 here and there. A new dress she buys. A cold drink on her way home from work.

After only three months, Hilda understands her financial picture better than ever before. She is aware of how money flows into her life, and how it flows out. She has stopped certain expenses and become far more aware of what she wants to spend her money on. Most importantly, she has started a savings account and is planning renovations to her house that she had never thought she would be able to afford.

All because she recognised the leaky bucket, and took positive action to plug the holes.

Leaky buckets are a feature of most people’s lives. Often more so when we earn a good salary and can afford to go out for drinks or pull into McDonald’s for a coffee on the way to work.

Finding the leaks in your money bucket and fixing them is one of the most important things you can do to change your financial picture. It does not mean that you stop having fun; it means that you do so with your budget in mind and that you are fully aware of what you spend your money on.

Managing your money is the ultimate get-rich scheme because it shows you where your money goes and helps you gain control over it. You don’t have to wait for someone to give you a salary increase – managing your money is entirely in your own hands. It is the most lucrative thing you can do with your time and money right now.

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