Off The Beaten Track

Basic Budgeting Guidelines

Financial Plans

Having financial goals is vital if you ever want to have some semblance of financial stability while working towards fulfilling your dreams, whatever they may be. This is why at the core of a solid financial plan, setting up a proper budget is essential. A budget helps you have a complete view of your finances and reveals any blindspots that might delay progress towards achieving your financial goals.

The trick with creating a budget is that you have to be honest with yourself at all times. Don’t gloss over ‘small’ things because you think they’re insignificant. It’s always the little things that add up.  In order to help you get started with budgeting, we’ve put together a few tips to help you draw up a budget that is easy to stick to.

Use the 50/20/30 principle

The 50/20/30 principle will help you prioritise and organise your budget. You’ll be able to separate fixed and variable costs, and separate wants from needs (you still have to be objective). You can check out our post from last week ‘Budgeting101: Understanding the 50/20/30 principle‘.

How much is coming in?

If you have one income stream, this should be fairLy simple. If you’re budgeting with a partner or you have more than one source of income, or if your income varies month-to-month, this may be a little difficult. Either way, you should have a general idea of what you expect. You can adjust this slightly once you have the actual figure

How much is going out?

The next step is to list your expenses. Use your 50/20/30 breakdown to put them in order. Do not forget to prioritise saving and investment as well as debt repayment. If you need a bit of guidance with paying off debt, you can have a look at part one and part two of our debt elimination posts.

Your budget should be:

  • Essential expenses: bond repayments/rent, car and transport costs, home and motor insurance, electricity and water bill, groceries.
  • Financial obligations: any monthly payments towards short terms credit facilitites and personal loans. You’ll also put savings and investments* under this category
  • Lifestyle choises: This is where plans for holidays, entertainment, cell phone contract etc.

Whatever you do, make sure your budget is realistic. Don’t budget for what you hope for, budget for what’s most likely to happen. This makes it easier for you to stick to your budget. If you find that your financial commitments exceed your income, rework your budget. First see what you can cut under the 30% allocation. Then look at the 50%. Try and find ways to spend less on groceries, maybe cancel your cellphone contract or satellite TV subscription. You may have to switch to a less expensive internet line. If you look really well, you’ll find that there are many little unnecessary costs that you can cut down on to free your income a little. Look in the right places.

Of course, having a beautiful and well organised budget on an excel spreadsheet or on paper is not going to guarantee much. It helps to review it often and make a conscious effort to stick to it, but that’s up to self discipline and determination.

1 Comment on Basic Budgeting Guidelines

  1. Excellent piece – you’re advice is spot on 🙂

    Like

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