Budgeting is one of the most important pillars of any financial plan. It is also one of the pillars that most people struggle with.
There have been a number of persons from different professions that we have dealt with, and we have found that everyone struggles to budget. A person could be earning R40 000 or R200 000 per month, and you’ll find that they overspend in some area or another.
Tips to help control your budget
- Use an app to help with your budgeting We recommend using the 22seven app to manage your money more easily. The app will help you avoid using spreadsheets, and manually inputting figures only to get to the third month and lose motivation. The app will make your budgeting life easy and get your expenses automated.
- Give every cent a name Income minus expenses have to equal zero. Therefore take your total income and categorise every cent until there is nothing left. Start with the important items and work your way down to the ‘nice to haves’.
- Do budgeting together Discuss your monthly finances together as a family. It is important to have unity in what you spend monthly and to communicate overspending as well. As a single person, we recommend getting an accountable friend to help you with your budgeting. It’s important to stick to your goals and to have someone pointing out blind spots in your spending.
- The envelope system This is an old-fashioned, yet effective system to control your spending. Withdraw cash from the bank, place the amount into a labelled envelope. Once the cash in the envelope runs out, stop spending. It’s the ultimate accountability partner.
- Emergency fund An emergency is something that no one can foresee and therefore it is advisable to put a small amount of money aside for unexpected expenses. We suggest that you have at least 3 months salary in your emergency fund. Simply open a separate savings account and only use it in case of an emergency.
- Constant irregularity Regular income is not a given for some people such as freelancers, and this leads to a different income every month. A great rule of thumb is to budget on what a low earning month would look like for you, and use those figures to plan out your budgeting.
- Define priorities It is a good idea to define why you are paying for certain things, whether you’re paying towards medical insurance or saving towards a holiday. Priorities seem to fade when times are tough, and it’s always a good idea to ask yourself ‘why’ you are paying for something, in order to figure out if it’s a necessity or a want.
- Give yourself a good start Give yourself a headstart with effective budgeting at the start of every month. Plan, pursue and win the prize.
- Attack the debt Debt will hold you and your financial plans back if it is not managed correctly. Sit down and list all your debt from the highest to the lowest interest rates, and start reducing your debt burden.
- Track your progress It is important to look back at how your budgeting journey started and appreciate how far you’ve come.
