You’re here because you want to get control of your wealth and create more financial freedom. Budgeting is the perfect place to start. Budgeting covers everything from expenses and income to paying off debt and saving for your dream holiday. Budgeting can be daunting, especially when you’re just starting out. Don’t be alarmed, though, budgeting can be made simple. Just as each person is unique, so also should your budget be unique. This is why we’ve put together a list of budgeting tips for beginners.
Creating a budget for you and your family means that you have a plan for every rand that comes into your bank account. No penny gets left unturned. It doesn’t necessarily mean you have to cut back on your spending, but it does mean that you know where your income is supposed to be spent. Once you’ve created a budget and are sticking to it, you will feel much more confident that your income will see you through to the end of the month, without having to bring out the “end of the month salty cracks”.
Step 1: Calculate your monthly income
If you have a stable job that provides you with a monthly salary, cool. Just write down whatever that salary is at the top of your budget. This step used to be a lot clearer a few years back, but now, with many people moving towards work from home or nomadic lifestyles, calculating an accurate monthly income can be a little more difficult than it seems. So many of us choose to have our fingers in many different pies and it gets even more complicated when those pies are unpredictable (like when you’re starting a new business). This is why the first of our budgeting tips for beginners is to calculate a minimum monthly income. What is the absolute minimum that you can bring in for the month?
Step 2: Calculate and list your expenses
The second budgeting tip for beginners is to list your expenses. Everyone has two kinds of expenses, fixed and variable. A fixed expense is an expense that gets deducted at the same rate every month, such as a payday loan repayment. These expenses could be car payments, rent or home loan payments, medical aid bills, school fees or the like. It’s super important to budget for these expenses so that your credit score stays in the green and you don’t have to fork out the extra cash to pay late fees.
The other type of expense you need to calculate and list is your variable expenses. These are the expenses that are not the same every month and this is the area where many people let money slip through the cracks. Expenses you may want to list here are your electricity and water bills, groceries and toiletries, petrol or diesel, eating out, etc.
You may have to adjust these numbers seasonally because they may change as the seasons do. For example, your geyser may end up running up more electricity costs because of those extra-long, comfy showers you love taking on a cold and rainy day. If you have no idea how much you’re spending on variable expenses, have a look at 3 months’ worth of bank statements and make an educated guess. Remember, budgets are meant to be reviewed and adjusted.
Step 3: Decide on your budget & keep track of your money
Once you’ve listed your current income and expenses, you are in a better position to actually create the budget you’ve been dreaming of. You should write down a realistic amount you’d like to or can afford to spend on each expense every month. Remember to leave leeway for savings pockets and unexpected expenses. There are ways to automate your budget like creating autopayments to your savings pockets that will save you time every month.
Now that you have a simple budget, you’re good to go. Now the tough part kicks in, actually keeping track of your income and expenses every month. This is where most beginners fall off the wagon. That’s why our final tip in our list of budgeting tips for beginners is to link your cards to an app or have an easy to access spreadsheet on your phone that you can fill in every day.
Doing a task once a day everyday and making it a habit can be difficult so make it easy on yourself. Don’t try and fit your tracking style into a mold just because someone else does it that way. Figure out what works for you. There are even interactive games where you can earn points for tracking your money. Get creative and don’t beat yourself up if you don’t get it right the first time. Even though creating and sticking to a budget can be tough in the beginning, be kind to yourself and persevere. Rome wasn’t built in a day.