Finance Minister, Enoch Godongwana, has just delivered the National Budget Speech against the backdrop of a tough economy and an even tougher energy crisis. Now it’s your turn. Sharpen your pencils South Africa because gaining control of your finances is just a budget away.
“Whether you are trying to get out of debt, save some money or simply stay in the green, a basic budget is one of the most underrated tools for gaining control of your finances, managing expenditure, saving and avoiding debt,” says Tyrone Lowther, Head of Budget Insurance.
Budget Insurance offers the following advice for drawing up your 2023 budget:
- The first step is to draw up a list of your fixed expenditures and other monthly deductions and tally these up against your income. If your expenses are more than your income, then you need to begin planning how you are going to reduce them.
- Some areas are easier to trim down on so concentrate on them first. Remember, even the smallest adjustments can make a meaningful difference over the long term.
- Once you have trimmed-down your expenses, you can start channelling the extra money you have into paying off your debt faster, starting with those with the highest interest rates first.
- Make sure your budget has a goal, whether it’s to pay off your credit card debt or save money for a family holiday. Working towards a goal provides direction, makes it more fun and, delivers a sense of accomplishment when the goal is finally achieved.
- Be realistic. If you set too lofty a goal and reaching it means deprivation on all fronts, the likelihood of you sticking to your budget is minimal.
- Be honest about your debt obligations and your expenses so that you have a clear and realistic picture of your financial situation.
- Cut, but be careful. There are certain expenses you may be tempted to cut, like vehicle and home maintenance or your monthly insurance premium. This could bring some short-term relief but may end up costing you far more in the long run.
- Stockpile. You can save thousands every month by looking out for and taking advantage of discounts and specials. By buying more, at a lower price, you’ll be able to stretch your rand and shrink your monthly shopping bill.
- Get that emergency fund started or boost it. It’s recommended that you have three to six months’ worth of expenses saved up in your emergency fund. Start by saving a small amount each month. Commit - don’t withdraw anything from this fund unless it’s a crisis.
- The 10% saving goal and the 30 day rule. Saving every month is hard but you should make it a priority. The rule of thumb is to try keep 10% of your salary aside for savings. Also avoid instant gratification by waiting 30 days to decide whether a luxury purchase is really worth it.
“Remember that even the smallest adjustments in a number of areas of your budget can add up to significant savings. The small changes and sacrifices you make now will be worth it in the long run,” says Lowther.