A key money management tool is a budget. It shows you how much is coming in and how much needs to go out for bills and expenses. It will help you make decisions about how you spend your money on a day-to-day basis. Without a budget, you’re making those decisions in the dark.
Here are a few ideas on how you can manage your budget:
1. Determine wants vs. needs
- In preparing a budget, it’s important to distinguish between needs and wants. You need food to live, but going out to eat costs a lot more than eating in. At the same time, going out and spending time with friends and family is important to your mental health. The trick is finding a balance. You need a budget that is not so strict that you are constantly breaking it, or so relaxed that you are always over-spending.
2. Money coming in vs. money going out
- First, list all of your sources of income including money from savings, loans, investments, scholarships, bursaries (if you are still studying) and money from part-time jobs. If you’re not sure, make as good a guess as you can. Remember that for employment income, taxes will be taken off.
- Then, list all of your expenses for the month.
3. Compare your expenses and your income
- If you are over budget, adjust your flexible expenses, such as spending money or groceries or entertainment. If you know in advance how much you’ll be short over the entire year, you can trim by just a little bit throughout the year and maintain control over your budget.
4. Budgeting Tools
- Use an online budget tool to get a detailed estimate of your costs. This way you are less likely to miss expenses and sources of income.
5. Managing your budget
Keep your budget up to date. Circumstances are bound to change. Use your budget to see how you can still make it work. For example, if you spend a little too much one week, find a way to make up for it the next.
Is your budget working? Try recording every Rand you spend for a week to see where you’re spending your money. Keep receipts or track what you spend in a notebook. Then do the math. Buying one cup of coffee a day could cost R 200 a month, or R 2 400 for the year. Can you afford that? You won’t know unless you figure out how it all adds up.
Don’t forget to make sure that your insurance fits into your budget. Talk to Indwe Risk Services today on 086 13 13 14.