Budgeting is easy if you know how to do it

While most people know that a budget is necessary, many simply don’t have the time to do the research and the legwork that goes into actually creating one, or one that works, at least.

According to African Bank, drawing up a budget isn’t the intensive and confusing task a lot of people think it is and the application of a simple rule is one sure way of organising your finances for good.

Alfred Ramosedi, African Bank group executive: sales and marketing explained, “Fifty percent of your budget should go towards paying your fixed expenses, 20 percent towards your savings and investments and, finally, 30 percent should be reserved for any additional costs that vary from month to month, such as petrol, groceries, entertainment, eating out and more.”

He said many South Africans make a fatal financial error. Instead of addressing their over-expenditure, they’re likely to use money meant for savings and investments or even rent and electricity money to fund entertainment and other luxuries for the month.

Read: Consumers schooled on benefits of collective savings

The wiser choice is to cut down on spending in the additional expenditure category.

This can be done in a number of ways:

• Limit the number of times you eat out during the week

• Eat at restaurants that have cheaper, better value meals

• When going shopping, take a certain amount of cash to cover the cost of items you intend to buy

• Pay attention to the brands you buy when you grocery shop

• Compare prices on different types of items with other stores before making purchases and take advantage of special offers

• Don’t buy items that are on sale and that you normally wouldn’t buy

• Restrain yourself from impulse spending.

“Anyone who has had to apply for debt consolidation will understand what it feels like to wish you’d been a little bit more budget-savvy and a little bit more credit-conscious,” explained Ramosedi.

“The key to financial freedom is being strict about recording all of your cash outlays throughout the month and sticking to the limits that you have set out for yourself. A budget is a lot of trial and error but once you find what works, you will be well on your way to safeguarding a worry-free financial future.”