Riding the Variable income waves with Melanie Rothman

Riding the Variable income waves with Melanie Rothman

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PSASA KZN Chapter meeting 15/09/2020

On Tuesday evening the KZN Chapter had the honour of having our very own Melanie Rothman speak to the KZN chapter about riding the variable income waves and handling money especially during these tough Covid 19 times. With her wealth of experience in finance and as an accountant she gave us a lot to think about when it comes to managing our finances as well as making smart money decisions.

Key takeaways from Melanies talk include:

A lot of the time, people do not like talking about money; they would rather talk about sex. People are uncomfortable with this conversation but it is a very important one to be had none the less.

The reason she likes to talk about money is because she had a lot of it at a certain point in her life. Her and her ex-husband were living an amazingly comfortable life financially, but there came a point when things changed and she lost her job and started realising that certain lifestyle changes needed to be made in order to survive financially.

Riding the variable income waves:

Getting a salary offers us a lot of financial security and comfort, but what happens when you do not have it anymore? What happens when all you must rely on is your variable income, this becomes a different ball game altogether, and this is the reality of most speakers.

Money is energy, and we need to be mindful of the energies we put out there because they have the power to manifest into our reality. If you constantly say things such as “I don’t have money” this will become your reality and you will not be able to attract the abundance of money which you deserve

When we talk about Variable income, we mean that income that is not stable and consistent. It comes from different sources and it comes at certain seasons. There will be seasons where your income will be great and others when it will not be, there will also be seasons where your expenditure is higher than usual and others which will be a lot less hectic. In 2020 we have experienced this seasonal pinch with the global pandemic of Covid 19, a lot of people have seen and felt the impact of not having as much money coming in as usual. How do we handle this?

It is important to break down your expenses into fixed amounts (those that will always be the same constant amount E.g. Car, bond, insurance, phones etc). and all the variable amounts (these are constant expenses which vary in amount due usage, Eg food, electricity, petrol etc.) and lastly discretionary amounts (these are things we like but can do without. E.g. Eating out, holidays, gifts etc.)

The reason why we split them is because we need to know what we spent over a period, plus minus 12 months. Once we have categorized our income vs our expenses in this way,it then becomes easier to separate our needs from our wants. We can then prioritize all the things we need and ensure that they are paid for first and then make our way down the prioritise list.

When drawing up a budget it is important to either get rid of your credit card altogether or hide it in order to avoid frequent usage unless you have a great degree of self-control. It’s important to take note of the exact amount you spend on your credit, as opposed to just looking at just the repayment portion.

Credit cards and store cards are two of the biggest causes of debt, eventually this money becomes overwhelming and you end up buying more and more things you don’t necessarily need on credit. This then leaves you stuck in debt.  In marriage debt is the can cause severe unhappiness, and is the one of the major causes for divorce next to infidelity.

It is important to also have a look at all your insurances and decide if you really need them all, that is where a lot of money gets wasted. For instance, if you have grown children who are of working age, is it necessary to have huge life insurances that cover them?

When we look at our income, we need to distinguish between our passive income (which is all the money we make from other sources which might not necessarily be the main income stream: E.g.( Rental, Air BnB, pension, affiliate marketing),as well as all the active income ( stable income from different jobs).

It’s important to note that an asset isn’t really an asset if it’s not helping you generate more money, we need find ways of making extra income like renting out a portion of your home or turning it into an air BnB.

Once you have established the different income streams you need to separate all these incomes, so you have a clear idea as to how much each income stream is making for you. The easiest way to do this is to have separate bank accounts for all income streams, and only transfer your “average monthly spends” to your main bank account. This will help with being able to put money aside for the drier seasons where not enough money is being made. It’s important to have a buffer of about 2-3 months’ salary in your account, and put that aside for rainy days.

To engage further with Melanie, head over to her Facebook page: Melanie Rothman and direct message for details.

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