Three ways to improve your budgeting

Durban – A budget is a useful tool for managing finances, it helps consumers monitor expenses and when done properly and consistently, it can act as a tool for meeting financial goals.

Dhashni Naidoo, Consumer Education manager at FNB, said having a budget is a good start.

“It allows you to track your spending and is a plan for how money will be spent. But over time readjustments may be necessary to ensure that your approach to budgeting is in line with what you aim to achieve. As the cost of living escalates, it can directly impact your approach to budgeting because an increase in costs has a direct impact on income,” Naidoo said.

“Therefore, we need to assess our expenses and determine how we can reduce expenditure on non-essential items.  Wants are things we don’t really need to survive – they are nice to have.  And so we need to be prudent and disciplined about reducing expenditure on luxuries or non-essential items,” added Naidoo.

There are two types of expenses that must be considered when drawing up a budget and these include:

Fixed expenses –  expenses that happen regularly and remain unchanged over a certain period. e.g. rent, bond, school fees, insurance payments etc.
Variable or changing expenses: These are expenses that you make every month, however they vary and change depending on your usage, e.g. airtime/data, electricity, water, pay-TV subscriptions, groceries. When we are required to adjust and cut down on certain expenses, it is usually easier to cut down on variable expenses.

Emergencies – It’s important to keep some money for emergencies that may come up during the month. For example, if you have a burst tyre and have an emergency savings fund, you won’t have to worry about having to borrow to replace the tyre.

Budget to save – It is important that you cater for savings in your budget, by allocating a portion of your income to savings. Make sure you transfer your saving portion to a separate savings account. In this way you ensure the money is not available and you won’t be tempted to use it on unnecessary expenses.

According to Naidoo, many people worry about going over budget, when in fact they should focus on keeping within their budget. Consumers should actively manage their budgets to reduce the possibility of expenses exceeding their income as this helps track of where money is spent.

“A budget is an essential part of money management and to see its benefits it must be practiced consistently. Also, important to note is that while you may have a personal budget, consider having a family budget as well that can help manage family finances. Most households are feeling the pressure of the ever-increasing cost of living, but even during tough times a budget is of utmost importance,” Naidoo said.

Savings is often ‘lost’ in the overall budgeting process simply because of overwhelming demands for spending money,”  Naidoo said.