Planning the ideal budget for 2014
Drawing up a budget to track how much money you spend is an important financial goal you should make in 2014.
JOHANNESBURG – “It’s a great New Year’s resolution and a good time to set up a budget. Creating a budget is simple, although it may seem scary at first,” says Eunice Sibiya, FNB Head of Consumer Education.
A budget lets you understand how much you earn and spend so that you have a clear idea of where your money is going each month. Here are a few tips on how you could start:
You will need your latest three or four months bank statements to start this task. The first step is to calculate your income, this amount should include your salary or wage, an average of commissions earned and any cash allowance you may receive. The next step is to look at all the money going out of your account on a monthly basis which includes fixed costs such as your rent or bond, electricity, insurance policies and transport costs.
“Try to be as accurate as possible and don’t guess,” says Sibiya. “Remember to include what you spend on gifts, entertainment, takeaway meals, any cash withdrawals as well as repayments on credit and store cards.”
Once you have done these calculations, compare your income versus your expenses, you should be left with some money. If that number is in the negative, which is known as a shortfall, you are spending too much and you can go into debt. The more debt you have, the harder it is to recover,” warns Sibiya.
To plan a budget you need to align your spending and your income.
If your entire income is, for example R10 000, you only have this amount to allocate to spending and saving in your budget. You shouldn’t be relying on credit such as credit or store cards to get you through the month.
If your fixed costs for example, add up to R6 000, you know that you only have R4 000 for the rest of your savings and expenses. If this is not enough you will have to review your spending so that you don’t incur a shortfall.
It is highly unlikely that you will be able to drastically change your income, so the only way to manage your money better is to control your spending and budget for your savings. If you do not budget for your savings you may never end up saving anything for a rainy day or for something special.
“Make it a priority to pay off your debt first after your fixed costs and then put some money away for saving,” suggests Sibiya. “If you have borrowed on store or credit cards, paying them off as quickly as possible, this will free up some additional cash.”
A good budget doesn’t have to be complicated, but there is no way in which to keep your finances under control without one.
For more information contact:
Chloe Hackland
Tel: 087 3119124 Mobile: 0833050144; Email: chackland@fnb.co.za
