The Art of Budgeting: How to Better Manage Your Money

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A budget will show you exactly where your money is going and how much you’ll have left at the end of the month if you stick to your plan.

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When it comes to money management, for many years, South African consumers have been overly reliant on credit to help them achieve their goals. But that is simply not a sustainable solution. The result is that the country has 25 million active credit consumers, with more than 10 million of those currently behind on their payments.

According to the National Credit Regulator (NCR), South Africans are dangerously over-indebted – and still clamouring for more credit. The only way to turn the situation around is for consumers to better understand the credit markets and learn how to live within their means.

How can a budget help?

A personal budget is a simple financial plan that allocates money coming in (income) towards expenses. “Where does the money go?” is a common question we all ask. A budget will show you exactly where your money is going and how much you’ll have left at the end of the month if you stick to your plan.

How to create a budget

Building a budget is very simple and something you can easily do yourself. The first step is to find a budget template. There are many templates out there, so you need to find one that works for you. This free excel budget template is a good starting point.

The first step is to enter the income you will receive for the month, which is likely to be your monthly wage from your employer. You can then go through each of the expenses and enter the amount you think you’re likely to spend in the ‘Projected Cost’ field. It’s very important that at the end of the month, you enter the ‘Actual Cost’ of each of the items, as it’s very common to underestimate your spending.

Once you’ve entered all your projected costs for the month, the spreadsheet will calculate your ‘Projected Balance’ for the month i.e. your projected income minus your projected expenditure. If the figure is positive, then unless there’s an unexpected financial emergency during the month, you will not need to rely on credit. If the projected balance is negative, you will need to relook at your budget and see where your costs can be cut.

Set saving and debt repayment goals

Once you’ve calculated your budget, you should apply it to the longer-term and set saving and debt repayment goals. If you’re making more money than you’re spending, you should earmark a certain amount of that surplus every month to repaying your debts or saving. Ideally, you’ll be able to assign 20 percent of your income every month to either saving or repaying debts. Over the longer-term, someone who follows that plan should be able to achieve their financial goals and retire comfortably.

Every budget needs some wiggle room

Of course, life is for living, so you must separate your wants from your needs when determining your expenditure and assign some money to each. Your ‘needs’ are items that are essential for you to live and work, such as rent, utility bills, mobile phone bills, groceries, etc. Wants are discretionary expenses such as meals out, holidays and entertainment. You should assign around 30 percent of your income to your wants. If you’re keen to get out of debt as quickly as possible, you may decide to assign more money to debt repayments rather your wants for a period of time, but your budget shouldn’t be so austere that you can’t have any fun!

Do you have any budgeting tips you can share with our readers? Please share yours in the comments section below.

zumurphy.com

Publish Date – 05-12-2019

TITLE

The Art of Budgeting: How to Better Manage Your Money

META DESCRIPTION

A budget will show you exactly where your money is going and how much you’ll have left at the end of the month if you stick to your plan.

BODY COPY

When it comes to money management, for many years, South African consumers have been overly reliant on credit to help them achieve their goals. But that is simply not a sustainable solution. The result is that the country has 25 million active credit consumers, with more than 10 million of those currently behind on their payments.

According to the National Credit Regulator (NCR), South Africans are dangerously over-indebted – and still clamouring for more credit. The only way to turn the situation around is for consumers to better understand the credit markets and learn how to live within their means.

How can a budget help?

A personal budget is a simple financial plan that allocates money coming in (income) towards expenses. “Where does the money go?” is a common question we all ask. A budget will show you exactly where your money is going and how much you’ll have left at the end of the month if you stick to your plan.

How to create a budget

Building a budget is very simple and something you can easily do yourself. The first step is to find a budget template. There are many templates out there, so you need to find one that works for you. This free excel budget template is a good starting point.

The first step is to enter the income you will receive for the month, which is likely to be your monthly wage from your employer. You can then go through each of the expenses and enter the amount you think you’re likely to spend in the ‘Projected Cost’ field. It’s very important that at the end of the month, you enter the ‘Actual Cost’ of each of the items, as it’s very common to underestimate your spending.

Once you’ve entered all your projected costs for the month, the spreadsheet will calculate your ‘Projected Balance’ for the month i.e. your projected income minus your projected expenditure. If the figure is positive, then unless there’s an unexpected financial emergency during the month, you will not need to rely on credit. If the projected balance is negative, you will need to relook at your budget and see where your costs can be cut.

Set saving and debt repayment goals

Once you’ve calculated your budget, you should apply it to the longer-term and set saving and debt repayment goals. If you’re making more money than you’re spending, you should earmark a certain amount of that surplus every month to repaying your debts or saving. Ideally, you’ll be able to assign 20 percent of your income every month to either saving or repaying debts. Over the longer-term, someone who follows that plan should be able to achieve their financial goals and retire comfortably.

Every budget needs some wiggle room

Of course, life is for living, so you must separate your wants from your needs when determining your expenditure and assign some money to each. Your ‘needs’ are items that are essential for you to live and work, such as rent, utility bills, mobile phone bills, groceries, etc. Wants are discretionary expenses such as meals out, holidays and entertainment. You should assign around 30 percent of your income to your wants. If you’re keen to get out of debt as quickly as possible, you may decide to assign more money to debt repayments rather your wants for a period of time, but your budget shouldn’t be so austere that you can’t have any fun!

Do you have any budgeting tips you can share with our readers? Please share yours in the comments section below.

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