Mastering your budget

You don't have to be Pravin Gordhan to master a budget. Here's a step-by-step guide to help you budget like a pro.

Every year our finance minister takes us through the year’s budget. Luckily, we don’t have to work with such big numbers, but his speech does show us how important having a budget is.

A well-run budget will keep you from living from one paycheque to the next and allow you to save for big goals. Most importantly, it can help you get out of debt and lessen the stress that comes with paying bills.

All you have to do is separate your needs from your wants, then divide your spending into 3: essential expenses (50%); financial priorities (30%) and lifestyle choices (20%). We call it the 50/30/20 rule. Here’s a step-by-step guide to get you going:

First, list all your sources of income:


This includes your salary or wages. If you get child support, that, too, needs to be in there and whatever other extra jobs you might have.

Then put down all your essential expenses:


This covers your needs and no more than half of your salary should go to this. It will include things like your rent or bond; groceries, petrol or taxi fare, water and electricity.

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Next your financial priorities:


They should add up to 30% of your income. You should be saving for retirement and investments. What about the dream holiday? Debts like loans and credit card payments also go in here. Don’t forget the total cost of all those bank fees. And if you’re not happy with what your bank is charging you switch.

Have some money left over for your wants:


These fall under lifestyle choices, like eating out, clothes and hobbies. If you’re spending more than 20% of your money on these, you need to make some changes. Eat out less, or cut out the DSTV. Here are more tips to help you spend smarter.

Make budgeting a habit:


Every month, update your budget so you know how much of your salary you actually used compared to what you’d planned for. If you do go over budget, find out why. You might have a habit, like smoking or buying clothes, that’s costing you more than you think. Use the habit breaker tool to find out how much you could be saving it you kicked your habit.

Pace yourself:


Remember, it sometimes takes a few months before you get fully on track. If you’re consistent, though, you’ll see the payoffs. And don’t be afraid to ask for help if you need it.

Source: Capitec

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