How to create a budget

how to create a budget

As we edge towards the end of 2021, and with our new year’s resolutions on the horizon, many of us are going to start reconsidering our budgets. And there are those amongst us who have never budgeted at all. Whether you have just entered the world of work and want to spend and save wisely, or you are an old hand learning new tricks, we all need to know how to create a budget.


Step 1: What do you need?

I have spent many hours pouring over articles about how to set up and maintain a budget. And inevitably, the first step of creating a budget is to write down your needs or expenses. These would typically include:

  • Medical Aid
  • Rent
  • Groceries
  • Phone contracts
  • School Fees
  • House staff (whether gardeners or domestic workers)
  • Fuel
  • Bank Fees
  • Medication
  • Entertainment
  • Insurance
  • Electricity
  • Savings
  • Birthday presents
  • Christmas savings pocket
  • Car fees (if your car is financed)
  • Other loans

These expenses can fall into two categories: Fixed and Variable (as we like to call them in Math Literacy).

Step 2: Write down your fixed expenses first

– these will typically remain the same for a 12 month period so its easier to work from this point. Fixed expenses will include:

  • Rent
  • Medical Aid
  • Phone Contracts
  • School Fees
  • House Staff
  • Bank Fees
  • Insurance
  • Savings
    • There are several ideas for savings but make sure that you are saving towards retirement (the earlier you start the better). If you have kids and are able, lots of banks offer a children’s savings account (mine is with FNB) which have great interest rates. Putting aside even R200 a month, from their first birthday with say an interest rate of 10% per year, compounded monthly would give your child a whopping R106 453 on their 18th birthday, and if you waited until their 21st birthday it would be R151 874.
    • Other suggestions for savings pockets include a holiday fund, entertainment fund, a car fund (for a future car, or for car maintenance).
    • If you love to get your hair done with highlights and expensive treatments, you could also have a hair savings pocket 😉
    • Emergency fund – experts at Investopedia recommend a 3 – 6 month expenses saving fund. They also suggest that you have easy access to these funds in case of that emergency.
  • Christmas savings pocket (if you are anything like me, Christmas is a time where I tend to overspend. I started the Christmas savings pocket last year to help with the expenses of Christmas and too make sure that I wouldn’t get into debt. Setting aside a small amount every month, helps a lot at the end of the year). 
  • Car Fees
  • Other loans
    • Credit card payments
    • Short term loans

Step 3: Calculate what remains

Add up all your fixed costs, and calculate what is left over from your salary or income. (In other words, subtract the fixed costs from your income). I like to use my beautiful Sharp EL-334WB calculator to do this. It has large buttons and a large screen, so it is easy to read the totals.


Step 4: Work out your average variable costs

Now here comes the tricky part. For most of us, we tend to spend approximately the same amount on their variable costs every month. This is why creating a budget on a monthly basis is important. Some advise that you create a budget for 3 months in advance (this is particularly for birthdays and to plan for upcoming expenses – like a car service).


For me, groceries not only include food, but also nappies, household cleaning supplies and anything else that is used for a smooth eating or household management experience.  This is because I traditionally shop at Checkers which has everything I need in one place, and it would be a big pain to separate the two (or more) different categories on the bills.

Take a look at what you have spent on groceries over the last three months. This may be difficult to track if you have thrown away the receipts or used cash. But if you have paid for the majority of your groceries using your bank card, you can easily see what you have spent over the last 3 months.

Take an average of this spend (add the grocery spend totals together and divide by 3 months), this will be your average grocery spend.

There are two ways split your groceries budget.

The first is to have a major monthly shop at the beginning of the month, and then to get your fresh stuff (like bread, milk and veggies) on a weekly basis.

The second is to divide your grocery budget by the number of weeks between pay-days and to spend only what you have allocated to that week.

If you are struggling to stick to your grocery budget (as most of us do, when we are standing in the chocolate aisle) there are a couple of things that you can do:

  • Write out a grocery list (and buy only what is on that list).
  • Carry a small pocket calculator with you (like the Sharp EL-231, or the EL-480 which has a leather cover so you can keep your list safely inside it).
  • Shop online
    • This has saved us a lot of money and time over the last year. I only stick to my list (well, 90% of the time anyway), and I don’t do (many) impulse buys. It also means that I can see the total for my basket at any moment and easily change my mind or any of the items. What’s also great is that most stores will try to help you with an alternative if the one you requested is out of stock. I usually do my online shopping on the app while I am waiting for my daughter to fall asleep. What’s also great is that when we run out of anything, I just quickly hop onto the app and add it to my shopping list immediately. And in that way, I don’t forget to get it.
  • Shop the specials. Try to pay attention to specials at the various stores that you frequent. Keep an eye out for specials on more expensive items (like your favourite coffee, or toilet paper) and stock up when they are on special.


There are not many ways that you can save money on petrol or diesel – other than trying to drive conservatively. If you have a set routine you should have a good idea of your monthly petrol spend. Take advantage of rewards programs – most petrol stations are partnered with a rewards program, whether its Standard bank and Caltex, or BP and Pick n Pay Smart Shopper rewards or Engen and FNB, these rewards really add up over time.

Medication and Doctor’s Fees

Some medical aids may require an upfront or part payment of Doctors’ fees or medication. Make sure that you set aside some money every month in case of medical emergencies. If you have a small child like me, they tend to get sick regularly so it is always a good idea to have something set aside in case you need the money. This also means that it won’t throw off the rest of your budget.



What do you like to do in your free time – watch movies, go out for dinner or buy a new book.? If any, or all, of these (or something else entirely) are a regular expense, remember to include them in your budget. Some other entertainment expenses might include a Showmax or Netflix subscription, or an apple subscription. Remember to check your bank statements for any forgotten subscriptions (and cancel those that you aren’t using).



Electricity tends to fluctuate with the seasons. You may run a heater in winter, or a fan in summer. Your fridge may work harder in summer to keep things cool. You will do more washing in winter because you wear more layers. If you are planning your budget for the entire year, plan to spend a bit more on electricity in the winter months.


Birthday Presents

Although we have them every year, other people’s birthday’s may sneak up on us. It is a good idea to plan ahead and check for birthdays. Or to have a special birthday present fund – especially if you have lots of birthdays close together. Another great option is to use your rewards points for birthday presents. (I am currently saving up my ebucks to buy my husband a coffee machine for his birthday).


Step 5: Add it all up

Once you have all of your numbers – make sure that they add  up to less than or equal to your income. If your expenses add up to more than you are earning, you will need to go back through your budget and see what you can cut. The most commonly cut expenses tend to be entertainment and groceries (meal planning helps with this), and spending less on birthday presents.


Step 6: Stick to it

This may be the hardest part of all. You need to be able to stick to your budget. The Budget Mom has some great suggestions for helping you to stick to your budget. One of these is to write all of your expected expenses on a monthly calendar, and the actual amounts that you spend on the days that you spend them. I would suggest using different colours for those regular expenses (like groceries and fuel). You can then track what is left from each allotted budget so that you don’t run into any other surprises at the end of the month.


Download these free resources to get yourself started:

A 2022 Calendar to keep you on track.

And a sample budget to get you started. This will add the relevant totals for you and uses the categories we set out in this article.

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