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Posted on 2016-01-13
You’ve made it to 2016 and after some happy holiday spending, it might seem like you’ve got too much month left at the end of your money. Putting together a personal budget can help you stay on top of debt and even save a little extra.
Here are our tips for creating a basic budget:
The first step to determining a budget is to pick a system of organisation. If you’ve never created one before, start with a simple Microsoft Excel sheet. If you want to keep it as basic as possible, you can have just two columns – one for income, one for expenses. When you can see income and expenses side by side, you can figure out easily if you’re regularly coming out on top or not.
2. Calculate your income
Once you’ve created your income vs expenses columns, you can add in rows for your various forms of inbound and outgoing money. If you earn one salary, then you’ll have just one income row, but if you make money from multiple sources, such as with freelancing or consulting work, add as many as you need to.
3. Work out your expenses
Calculating your expenses is probably going to be a bit more complicated. Go through your bank statements so that you can see what debit orders are coming off monthly, whom you’ve transferred money to, and what you’ve paid with your debit and credit cards. However, this won’t account for any cash expenses, so keep your till slips and receipts too so you can be sure you’re aware of every cent that you spend. If you want an average idea of just where you’re spending your cash, you should do this for three to six months, but a minimum of one month is a must to make it work.
And remember to put in each and every expense, no matter how small it is. If you spend R6 on a pack of cookies, it might not seem like a lot, but if you’re buying it three times a week, it adds up pretty quickly. One of the easiest ways to keep track of expenses is to group them into categories. There are dozens of ways you could be spending your money, but here are a few ideas to get you started:
Transport: This will include your monthly vehicle repayments, petrol, taxi fares and any vehicle maintenance that is required.
Food: This is groceries, takeaways, restaurants, as well as pet food, if you’ve got furry friends.
Shelter: This will be your bond repayments or rent, plus any home repairs.
Utilities: Rates and taxes, electricity, internet, television, and rubbish collection are some of the utilities you need to keep track of.
Medical cover: If you’ve got a medical aid or you’re on any regular chronic medication, add it in this row.
Insurance: Depending on your needs, this will include things like life, car, home contents, buildings, and portable possessions insurance. If you don’t have cover for any of these, the beginning of the year is a good time to get insurance quotes and work it into your annual budget early on.
Clothing: This includes your outfits, makeup, jewellery, clothing, and any other clothes you buy for your family. At this time of the year, this may be a little higher with having to buy new school uniforms and sports kits.
Savings: If you’ve got a retirement annuity, a holiday account, education fund, or even just a simple savings account that you deposit money into when you can, you’ll add it under here.
Entertainment: Everyone needs a little rest and a chance to let loose every now and then. Whether you love watching the latest blockbusters at the cinema or enjoy a couple drinks with friends on the weekend, add all of your leisure activities here.
4. Compare and review
Once you’ve worked out all of your expenses, you’ll be able to see where you’re falling short and where you’re doing quite well. If a single expense looks excessively high, ask yourself why. If you’re spending more than you’re bringing in, you’ll need to find a way to cut down.
5. Make changes
Luxuries are usually the first to go, but you can save money in other ways as well. For example, if your insurance premiums seem high, you can get other insurance quotes; by doing so, you might be able to save a few hundred rand a month.
Budget Insurance makes it easy to save money. You can get an online insurance quote by filling in your details, and we’ll work out a personalised premium for you; it could be that easy to save on your monthly insurance!
The information provided in this article is for informational purposes only and do not constitute professional advice.
Life products are underwritten by 1Life, an authorised financial services provider.