Back to Budget basics in your house.
In this week’s blog, Consumer Debt Support (CDS) would like to highlight a sensitive but very important subject in every household in South Africa, the monthly budget. We found that the majority of our clients end up in financial trouble due to mismanagement of their income. The consequences of not living according to some sort of budget plan lead to shortcomings of much-needed provisions and piled up unpaid bills.
What is a budget?
It is your monthly calculated spending plan of your salary on a piece of paper. It’s also a discipline of good money management to see to all the basic and essential needs of the household and to keep all your creditor payments up to date. Not every household has the same debt obligations or expenses but everyone has a list of monthly creditors to pay. Knowing what you have to spend when the new month cycle starts, and spending it over a spread that will last for the month is called working within a budget.
Push yourself and Save!
What is the core of a budget? Get creative and stick to the plan.
To enjoy your hard-earned money is your right, but the core and most important factor is to work with a disciplined budget plan and stick to it. You create a sensible habit of avoiding a deficit and with smart planning in the week or a few days before your payday, you could end up saving a portion of your cash flow every month for a much-needed rainy day.
Yes, you can save if you push yourself to start with at least 10% (ten percent) of your monthly income. I cannot overstate saving money enough, it is vital that income earners plan a percentage of their income towards saving for that rainy day. It’s your investment and responsibility to grow a savings back up plan, even if it’s in a different savings account.
Once you have started this saving plan and keep it up for three months ongoing, it will become a good structural habit. We are faced with difficult financial situations and an emergency cash flow could come in handy in unforeseen events. The results are that you can afford to pay for that unexpected car breakdown, or for the school camp that will cost you extra money, or for that emergency dentist visit to assist with fixing a tooth. Assuming the medical aid fund does not cover such costs or there is no medical aid scheme.
Structure your budget is the key
The most important month-end payments must be highlighted on your plan. Paying rent or an bond on the house, the municipality bill, transport to work, food for the family, medical expenses and your creditors. List your monthly essential spending needs. On Food, a grocery plan is a good idea, list the basic food groups your family needs every week and multiply it to fit in with the whole month. No shame to research your local food special offers and plan your spending to save accordingly.
Calculate your daily or weekly expenses on the balance amount after you have deducted the obligated bank payments to your house, car and monthly creditors. Limit yourself to luxuries if possible and maintain a set responsibility and add the amounts on your list that you must pay out.
Remember to save at least 10% aside into a separate bank account for your ICE money (In Case of Emergency)
Our example of a budget list
We share with you a graphic model of a typical budget to give you an idea of a listing. You can use it if you see the need for it and add your relevant amounts at each point for your own calculation.
The list below is a draft for when you live in your own place or share accommodation with friends or family members:
- Rent or the bond.
- Electricity and water bill.
- School fees.
- Rates and taxes.
- Medical aid. (Gap cover for medical aid, when you in your self-payment gap and you need to cover major procedures out your pocket for specialists.)
- Insurance, life cover, income protector, disability cover. (if not included in deductions)
- Credit agreements and bank debit orders
- Vehicle insurance if you have a licensed vehicle on the road.
- Fuel cost to get to work / using public transport.
- Groceries – vegetables, fresh fruit, porridges, dry ingredients, salt and spices and more, cheese, jams, etc. Meat produce in bulk for a month.
- Milk and bread for day to day take to school meals and take to work meals and weekend food in between meals. Pet Food (if applicable)
- Toiletries. These items have increased in price and one has to shop around before buying the basic needs.
- TV License
- Mobile phone, contract or prepaid plus airtime and data.
Other important considerations to list in case of need or expectancies:
- Funeral cover, which is a must have to look at what it cost to cremate or burial service at a church.
- Lunch box food.
- Medical expenses not covered by medical aid.
- Vehicle maintenance costs and every how many kilometres needed before the next service? One can budget the driving to ensure the kilometres usage is monitored that will keep the services more cost-effective.
- Internet connection, ADSL or Fibre.
- Birthday gifts
- The pension fund or pension annuity.
- Bank charges on your bank account.
Staying within your spending ability comes only with practicing a monthly budget and sticking to the program of doing so every month.
I remember when we were children my grandparents had a book and recorded every rand spend. When my granny did her shopping, she would stop and write the amounts down on her lists. At home both my grandparents would sit once a week and take stock on what they spent on fuel, groceries and other essential living expenses, money put aside towards their savings, just to see them through the month. Even in their younger years they had to live on a budget plan for their own financial survival.
Neglecting to do a budget every month can have a negative outcome for the family, and money spent on clothes and entertainment and other expenses that was not planned, could end up in unpaid bills and unnecessary credit bureaus black listings and eventually legal actions of creditors.
There is a believe that when you do something for a period of 14 days in a certain way, it will create a sustainable habit. My advice then would be to mark your calendar with your date of your payday and work on a budget plan to save yourself from financial stress.
Note from the author Annienne Nel
I would like to encourage all my readers, clients and future clients to manage your finances with responsibility in the uncertain future we are facing. Nobody can predict the changes that will affect our economy but it has a debt concerning factor on our income and the way we need to save to survive. I hope that the information I shared with you will be of help for you to understand the importance of a well-maintained budget plan.
I pray for God’s love and goodness on you and your family to receive His blessings and wisdom to enjoy the fruit of your labour.
Best regards to you all.