How to prepare a 2019 budget that sticks

Aside from vows to lose weight, quit smoking and exercise regularly, you may also be hoping to get your finances under control in 2019, pay off debt or start an emergency fund. These are all honourable goals and certainly worth seeing through to the end, so what questions should you ask yourself before you get started?

According to famed US financial advisor, author and radio host, Dave Ramsey, there are “7 baby steps” you can take to get out of debt and start building wealth. These are (in very particular order):

1. Start saving for an emergency fund and do so as fast as you can. This comes in handy for unexpected events. As a good start, aim to save about R10 000.
2. Pay off debt using the snowball method. You can’t move forward into financial freedom if you have debt hanging over your head.
3. Build up your emergency fund further, so that you have 3–6 months stashed away for unexpected emergencies.
4. Get serious about your retirement fund, no matter your age.
5. Start saving for your children’s education. This begins once you’ve paid off your debt and your emergency fund is in place.
6. Pay off your home loan as quickly as you can. If you’re able to increase your monthly repayments, go for it!
7. Build wealth and give. This is the most fun step of all, because once you’re debt-free, what do you do? Anything you want!

Some of the above steps may seem too much like ‘adulting’ for where you are in your life right now, but all kinds of advice you’ll find on financial stability will state that it’s never too early to start thinking about your financial future.

How to start your 2019 budget

Bring out the calendar, open a spreadsheet and get stuck in.

1. Review the previous year’s budget

You should have a fairly good idea of how well you stuck to your budget last year. Did you reach your goals or did you struggle to stick to your plans? Relooking at last year’s results will help you know whether you need to reduce your spending, cut debt or increase your income. 

2. Make allowances for change

If you have any large changes that you can reasonably anticipate, like college fees or a new bond, incorporate it into your plans as early as possible — even if you don’t know how much it will cost you. Waiting until you know the exact amount may not leave you with enough time to save.

3. Estimate more, rather than less

When you don't know how much you need, shift the expenses figure more toward the high side, and income toward the low side. This will provide a cushion in case things don’t go as planned. Plus, with costs constantly on the rise, it’s safe to assume you will be paying slightly more for things as the year progresses.

4. Set your goals

What are your absolute must-haves for 2019? Revise last year’s goals and set new ones according to your plans.

5. Adjust your budget accordingly

Once you have your guesstimations and goals in hand, as well as your projected expenses and income, then it’s time to change last year’s budget accordingly. Congratulations for being ahead of the game. The first step is already done!

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