Nowadays, making a transaction can feel somewhat unreal. Just a swipe and a glance at the number displayed on a digital screen. Whilst this seems easy and practical, it poses a big problem that is too-often overlooked.
When we stop dealing with physical coins and notes – a mental disconnect occurs between the digital numbers and what they actually mean to you in terms of how much money you have just spent, and how much you have left.
This is all the more reason to keep a budget – or a spending plan. Here are some budgeting tips to help you along your way:
- You need to start by making a list of what you spend. Many of us know when we’re not doing well financially, but hide from the uncomfortable reality until we are forced to face it.
- First, write down your fixed expenses: rent, bond instalments, union membership fees, insurance premiums etc.
- Next, list variable expenses: food, transport, rates, cellphone, entertainment and clothing. (Don’t underestimate costs, you will only be sabotaging your own efforts.)
- Now a slightly tricky one, you will need to list irregular expenses: car maintenance, home repairs and so on. Try to work out an average monthly spend. (Again, it’s better to overestimate than to come up short.)
- Finally, you need to add together all of your cost estimates. If the total is more than your earnings, you will need to make some changes. At least now that you know exactly where you are with your spending habits, you’re already in a financially stronger position!
Now to get back in the black!
- List your expenses in order of importance. Some expenses you obviously cannot live without: accommodation, transport and food. But consider whether you can reduce some of your other costs, such as entertainment and clothing.
- Now use the money that you’ve freed up from your budget to immediately start servicing your debt, especially store and credit card debts.
- Once you’re debt free you should establish a basic emergency fund for unexpected expenses. A month’s salary is a good start and it will give you a real sense of security once you have it stashed away.
- You should also try to invest some money each month into your financial goals and investments, like saving for your retirement and your children’s education. This excludes your employer’s pension scheme or your own retirement investments.
Need some help drawing up a budget? Let’s get in touch!