a beginners guide to budgeting NEW CI Main

Step-by-Step Beginner’s Budgeting Guide

Your first line of defence against spending too much money is your budget. A budget is a tool you need to take control of your finances. And you’ll discover that it is simpler to start saving money and making plans for the future once everything is laid out in black and white.

Although budgets are relatively simple to understand and set up, many people often simply don’t know where to start. 

This step-by-step beginner’s budgeting uide will show you how to create your own savings plan so you can experience the magic of budgeting.

 

Start by calculating your income

If you receive a monthly salary, you should be aware of the amount that is deposited into your bank account at the end of each month (after deductions, such as PAYE tax). 

If you receive a monthly maintenance payment from an ex-spouse or any other income, such as rent from a flat or a room you rent out, be sure to include it.

This final figure will be the starting point for setting up your budget. 

 

List your monthly fixed expenses

There are some costs that remain the same each month, known as fixed expenses. They might consist of:

  • Repayment of rent or a bond
  • Utility bills
  • Funeral coverage and insurance
  • Pay for domestic workers
  • School fees and associated costs
  • Services like streaming, for instance, Netflix

 

List your unexpected expenses (also known as variable expenses)

Because they change every month, variable expenses are a little trickier to monitor. They could consist of:

  • Transport
  • Food
  • Phone bill, airtime, data
  • Entertainment, such as family trips
  • Minor daily expenses like work lunch or beverages (these can add up quickly)
  • Clothing (especially at the change of season, such as from summer to winter)
  • Emergency expenses like home or car repairs
  • School trips or school supplies like textbooks, stationery, etc. 
  • Sudden family support, such as having to lend money to relatives

Estimate each category, but then keep track of your expenditures during the following few months. You can do this by keeping track of every rand you spend (be honest with yourself). Then make the necessary adjustments to your budget’s overall expenses. 

 

Calculate your disposable income

Your total expenses are the sum of your fixed and variable costs. To calculate your total take-home pay, first, add up your fixed and variable costs. 

Your disposable income is the total you arrive at. The more of this sum, the better, but most people tend to spend their whole paychecks, leaving them with very little spare cash, which brings us to the next important step in the budgeting process. 

 

Prioritize your expenses to free up more savings

If you are having trouble making ends meet, evaluate your budget to determine where you could cut costs. Maybe there is a less expensive streaming service. To save money on transportation, you might be able to arrange for a lift with a colleague. 

You might be spending more than you anticipated on your work lunches and beverages, so you should be more strict about bringing meals from home. 

By figuring out where you might be overspending, you might be surprised at the amount of cash you can start to put away in your monthly budget. 

 

Create a budget plan

Your spending and saving budget is the money that remains after costs. Spending money is used on “wants” like entertainment, dining out, and hobbies.

Plan out how you’re going to use your spending money. You can track where it goes and stay inside your budget by doing this.

You can use your budget to make progress towards any savings objectives you may have. When you are aware of how much money you have available for “wants,” you may determine how much of it you would like to save.

A safety net for unforeseen costs can be created by having some cash saved away. Regularly setting aside any amount, no matter how small, will have a major impact down the line.

It’s critical to adapt your budget when circumstances change since it must fit your demands and way of life.

For instance, you might need to cut back on your spending or alter your savings objective if your expenses start to rise. You might also be able to increase your savings if you receive a pay raise or pay off some debt.

 

The power of cash savings

Cash consumers in South Africa may have a surprising advantage over those who set up savings accounts using their bank. Saving cash does not incur any of the additional costs associated with traditional banking methods. It also means you have direct access to your cash savings whenever you need them, which can be especially crucial in times of emergency. 

Cash-based South Africans can also send their savings to those who need it instantly when using facilities like OTT Collect, while the savings plans designed by the LAYAWAY platform allow you to save cash directly using an OTT Voucher, and use it later to purchase all your favourite items. 

If you save enough money over time, you could also consider investing this extra moola in stocks, which will grow your wealth significantly in the future. Don’t have a bank account? No problem. You can invest in managed trusts that consist of all the best market stocks when you use EASYInvest. You can simply add your cash investment to your preferred unit trust using OTT Voucher. 

The possibilities are endless when you save, and with OTT 4 Me, you can use your extra cash in the ways that you want. 

 

Frequently Asked Questions

Yes! You can use OTT Voucher to add cash to your savings account on the LAYAWAY platform. When you’ve reached your savings goal, you can use this amount to purchase the items on layby and have them delivered directly to your door.

Investments are considered a smart way to grow your savings over time. Even a small initial investment can grow significantly when placed in the right stocks.

Investing in stocks takes a lot of time and research. A good alternative is to use the EASYInvest platform. Here, your investment is placed in a unit trust managed by Momentum. This unit trust consists of the most promising stocks in the South African economy. If any of these stocks do badly, Momentum will simply shift your investment to other promising options.

It’s easy to invest with cash when you use OTT Voucher. Simply buy your voucher for the preferred investment amount using cash and add to your preferred unit trust using the unique 12-digit voucher PIN.

The simplest way to budget is to use these steps:

  • Calculate your income
  • List your monthly fixed expenses
  • List your unexpected expenses
  • Prioritise your spending
  • Create a budget plan

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