You probably have a bank account into which your salary is paid. It’s very likely that the balance in this account cycles from R6,000 on the 20th of the month (payday), to very nearly zero on the 19th of the next month. Your emotions do the same: from joy on the 20th, to despair as the 19th approaches. This is no way to manage your money. It’s bad for your emotional health. (And we are not talking about a short-term problem. From the table/calendar above, you could have this problem for 504 months – that’s for all of your 42 earning years! Ouch! Double-ouch!)
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Don’t write off my solution as crazy before you’ve heard the whole story. Create a salary cushion, sitting right there in your salary account. That is a balance equal to at least a month’s salary, that is, well – just a cushion. What could be the benefits of this cushion?
- You don’t worry about no money in your account. You know there’s another salary sitting there. The peace of mind this brings is priceless.
- You have your very own emergency fund. For most money emergencies, yes, you can ‘borrow’ from yourself.
- If, for whatever reason, your salary is paid late, that’s no problem. There’s money in your account.
- The probability that you’ll borrow money and get into debt you can’t manage, is greatly reduced.
- You’ll earn a few rands in interest (but it’s not about this; it’s far more about good money management).
If there’s zero extra in your account right now, that’s ok. We have to start from where we are. Divide your salary (say that’s R6000) by 20 (20 months), and the answer is R300.
If you save R300 each month, then in 20 months you will have a salary cushion. Get pen and paper, and calculate a solution with your numbers.
You may decide that you want to create a cushion worth twice your salary, and you want to do this over two years.
That’s just great. Your friend may decide that she wants to create a cushion worth half her salary, and she wants to do this over six months. That’s okay too.
The cushion you create has got to be good for whatever is left of your 42 working years (see the table/calendar above). Oh – and you must design a cushion for your own head.
Now that you’ve heard the whole story, I doubt that you think it’s crazy. I’m glad you believe it – because only then can you achieve it. A salary cushion will help you to sleep easy at night.
And the blanket that will keep you warm is your budget.
Now, when you see saving for salary cushion in your budget (coming in my next blog), you’ll know what this means.
Jay Pillay’s first two critical decades were spent where his first decade began – in Pietermaritzburg. After studying at ML Sultan Technikon in Durban (anyone remember that place?), he then joined the sugar industry, working in Tongaat, Durban, and Xinavane – a sugar mill village 120km north of Maputo. Oh yes – there was a brief period of unfaithfulness, when he flirted with aluminium in Richard’s Bay. Upon retirement, he and his wife Dorothy – settled in Southport.
Jay began writing about salary management (for ordinary people living on a salary) in the early 2000s. Many of his articles were published by The Ripple Effect, a Durban-based corporate newsletter. In all his writing, Jay says he attempts to emphasise the big picture in salary management: it’s not just about making it to your next payday – it’s about making it to the end of your working life. It’s not just about your working life – it’s about your retirement too. It’s not just about the cost of living – it’s about the cost of dying too. It’s not just about you as a salary manager – it’s about your dependants too.
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