Budgeting

• Budget

  A plan for managing money, including income and expenses, over a period of time

  
• Reasons to budget

  • See how much money is available
  • Decide how much to spend on different things & Track spending
  • Ensure that you live within your means & pay off debt
  • Plan how to spend your money in the future & reach financial goals through savings
• Everyone uses money to meet their needs and goals
• Needs

  Things you can't live without
• Wants

  Things you'd like
• In budgeting, needs take preference over wants
• Objectives

  Stepping stones to achieving goals
• Short term goals

  Achieved within days, weeks, month or 2
• Long term goals

  Achieved over several months or even years
• Goals are prioritized according to your values
• Money related goals should be clear and specific
• Records to keep

  • Monthly bank statements
  • Receipts
  • Purchase slips with guarantees
  • Proof of interest received
  • Tax returns
  • Proof of credit card purchases
  • Insurance claim assessment certificates
  • Contracts for hire purchase/instalment sales
  • Insurance policies
  • Proof of investments
  • Proof of personal loans taken or given
  • Deposit slips
• Keeping records avoids excessive debt and allows you to save money
• Many South Africans found themselves in difficult financial positions due to not keeping records
• Consequences of not saving money

  • Unable to pay bills
  • Poor credit rating
  • No emergency fund
• You're never too young to start saving
• Emergency fund

  Money you can use when unexpected events happen
• Disasters will happen to everyone at some point so it's best to be prepared
• Examples of emergencies

  • Car repairs
  • New appliances
  • Family member lose their job
  • Illness or a death in the family
• Strategies to maximise savings

  • Put money in the place where you will earn the best interest (shop around for high interest and low fees)
  • If you are disciplined, you can use a rewards credit card each month to make purchases. Ensure it is paid in full each month to avoid hefty interest fees
  • Make use of retailer and banking points and rewards
• Steps to draw up a budget

  1. List expected income

  2. Estimate expenses

  3. Calculate difference between income & expenses for savings

  4. Track, Trim & target

  5. Correct if income & expenses don't balance

  
• Net income

  Gross income - deductions (such as tax) = money that you actually receive
• Types of expenses

  • Fixed expenses - specific, regular amounts (e.g. rent, school fees, car insurance)
  • Variable expenses - vary due to price changes or different circumstances
  • Luxury expenses - optional depending on availability
  • Emergency expenses - unexpected but still need to be paid
• Difference between total income and total expenditure

  Savings helps you to stay out of debt & financial difficulties, allows you to make cash purchases for larger items
• A balanced budget is income = expenditure + savings
• Ways to make more money

  • Work overtime
  • Start a home based business
  • Rent out a room
  • Find a better paying job
  • Additional part time jobs
• Ways to spend less

  • Make lifestyle adjustments to reduce expenditure - less eating out, using public facilities