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.
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:
These expenses can fall into two categories: Fixed and Variable (as we like to call them in Math Literacy).
– these will typically remain the same for a 12 month period so its easier to work from this point. Fixed expenses will include:
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.
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.
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:
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.
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.
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).
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.
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.
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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