Budgeting 101
A budget is a plan for how you will spend and save your money. It tracks your income (what you earn) and your expenditure (what you spend). Budgeting helps manage your money, avoid overspending and helps you plan for the future.
For example: Imagine you have R50 a week. You decide to spend R30 for your needs (like food and transport), R15 for wants (like entertainment), and save R5 for emergencies. This is how budgeting works—allocating money to different categories to avoid running out before the month ends."
1. Why Budgeting is Important
1.1 Prevents overspending: Budgeting makes sure you know how much you
can spend each month.
1.2 Helps save money: By tracking where your money goes, you can save for future goals.
1.3 Reduces stress: Knowing your financial situation brings peace of mind and helps you stay on track.
When you budget, you plan ahead for things like school expenses, saving for a car or setting aside money for college. It’s a powerful tool that helps ensure your goals are within reach.
2. The Components of a Budget
2.1 Income: The money you receive (allowance, part-time job, gifts, etc.).
2.2 Fixed expenses: Regular, predictable expenses (e.g., subscription services, rent, utilities).
2.3 Variable expenses: Spending that fluctuates month-to- month (e.g., groceries, entertainment).
2.4 Savings: Money set aside for future needs or emergencies.
3. Creating your Budget
3.1 Track your spending: Keep a record of everything you spend for a month.
3.2 Identify income and expenses: List all sources of income and categorize your expenses.
3.3 Set savings goals: Decide how much you want to save each month and for
what purpose (e.g., a vacation, new gadgets, or an emergency fund).
​Budgeting apps can make tracking your spending and setting savings goals easier by automatically categorizing your expenses and offering reminders.
4. The 50/30/20 Rule
A simple budgeting method:
4.1 50% for needs (e.g., food, shelter, transportation)
4.2 30% for wants (e.g., entertainment, eating out, shopping)
4.3 20% for savings (e.g., investments)
For example: If you earn R100 a week, the 50/30/20 rule would mean R50 for needs, R30 for wants, and R20 for savings/investments. This gives you a balanced approach to managing your money.
5. Tips for Sticking to your
Budget
5.1 As soon as you receive your monthly ‘earnings’, put some away into a
‘savings bucket’
5.2 Set reminders: Use a budgeting app or calendar to track your spending.
5.3 Review your budget regularly: Check in weekly or monthly to make sure
you're staying on track.
6. Common Budgeting Mistakes
to Avoid
6.1 Not including everything in your budget (e.g., small daily purchases).
6.2 Not adjusting for irregular expenses (e.g., gifts, one-time payments).
6.3 Failing to set realistic savings goals.