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May 2021 2nd edition

Budgeting keeps your finances in check

With July being savings month why not look at better ways of drawing up a budget that you can stick to.

How do I start a budget?

Before writing down anything on paper, you should think about your goals. These goals could be short-, mid- or long-term. Short-term could be a few days or a week, mid-term could be months and long-term could be years.

Are there rules to these goals?

There aren’t necessarily any rules, but there are guidelines which are easy to remember. When writing down your goals use the SMART principle. This means that your goals must be Specific, Measurable, Achievable, Realistic and Timely.

Your goal must be Specific; you must know what it is that you want. They must be Measurable. For example, you can’t say you want to buy an affordable car; you must be specific and say that you want to buy a car worth R100 000 by December or whatever time frame you give yourself to buy the car. Achievable meaning that the goal must be reached in the time you want to achieve it.

After writing down my goals can I begin with my budget?

Start by writing down your sources of income and how much money you get per month. Thereafter, you should write down your needs and wants. Prioritise your needs.

Needs are something you can’t live without. For example, one cannot live without food, shelter, rent, clothes etc.

Wants are the things you desire or wish to have but you can live without. For example, the latest cellphone or the fastest car.

What happens if I don’t budget?

Most of the time if you don’t budget, you tend use your money buying unnecessary things, leaving you with no money for the rest of the month. This often leads to people borrowing money to be able to attend to unexpected needs.

 What happens if I go over budget?

When you go over budget you tend to feel defeated, but that’s not the end. There are five ways to help you recover from going over your budget.

Step 1: Figure out what happened. It is important to find out why you overspent and ask questions like: Was the expense necessary? Why did it happen?
Step 2: Make necessary adjustments for the next month.
Step 3: Make goals and plans.
Step 4: Stick to your budget. Make budgeting permanent.
Step 5: Never cut your savings amounts.

*This information was supplied by the Western Cape Provincial Government