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The Importance of Budgeting for Good Money Management

A Budget is a quantitative plan for acquiring and using resources over a specific period. This helps in managing money and making informed financial decisions.


The purpose of a Budget is to build financial independence and financial freedom.

There are many budgeting tools on the internet.

Excel has a template which is quite useful.



In a recent survey from Unisa only 32% of South African Households prepare a monthly budget


Reasons why they don’t:

17% have too little money

  • 9% have sufficient money and feel they don’t need to

  • 47% don’t know how to

  • 15% say it’s too boring

  • 12 % site other reasons


There are 7 basic principles that need to be considered for Budgeting:

  • Assess your income

  • Track your expenses

  • Set your financial goals

  • Good and accurate differentiation between ‘’needs ‘’ and ‘’wants””

  • Create a budget that’s realistic

  • Create an Emergency Fund

  • Review and readjust regularly to stay in line



Assess your income

Salary, Interest, Dividends, Pension, Bonus


Tracking your expenses

Start with tracking your expenses first.

It’s best to do this over 3 or 4 months for a more accurate representation of actual expenses. The most accurate way of doing this would be to draw a 3-month bank statement and a 3-month credit card statement thereby you will be able to get a true amount of what you have spent in the preceding 3 months including any cash withdrawals you have made.


Include categories such as:

  • Housing

  • Groceries

  • Transport

  • Utilities

  • Repairs and Maintenance

  • Insurance Long and Short term

  • Education including School Fees, University Fees, Books, Uniform, Stationary, Tuition

  • Entertainment including Netflix, Spotify, DSTV

  • Savings

  • Cell phone, Fibre costs, Data costs, Internet Costs

  • Medical Expenses over and above your medical aid payments

  • Bank Charges

  • Domestic / Garden assistance

  • Loan repayments

  • Pet costs

  • Credit card debt

  • Provisional Tax payments

  • Gifts /Charity


Setting Financial Goals

Strive for the following realistic financial goals:

  • Deposit for a house or second home

  • Children’s education including University Education

  • Savings to achieve a strong, solid Emergency Fund

  • Vacations local/international

  • Retirement provision (according to the latest stats only 7% of SA retirees will be able to retire comfortably)

  • Eliminate credit card debt - Aim to settle your credit card at the end of every month


Needs versus wants - NB to differentiate

Make the decision on what you need vs what you want, eg:

  • Holidays and Weekends away

  • IT Connectivity, Upgraded cell phone

  • Fibre

  • New car

  • New furniture and Appliances

  • Cell phones for Children


Create a realistic budget for you and your Family

Budgeting is not a one size fits all, each family will have different requirements



Emergency Fund

An Emergency Fund is crucial in uncertain economic times like these.

This should be equal to around 6 months of your Annual Salary minimum for unexpected expenses. 12 Months would be better, but the important part is to start saving for your Emergency Fund Month by month. The more stable your income and household are, the less you need in your emergency fund. In these uncertain times it would be prudent to commence with a monthly amount and build from there. This is going to take discipline and time but will come with the reassurance that if something unexpected happens you are well prepared. Remember that saying of, it doesn’t matter what you earn, it’s what you get to keep.



Review and adjust on a regular basis

Your family needs and dynamics will change depending on what stage of life you are at.

Budgeting is dynamic and ever changing. Try to be as accurate as possible for best results.


Once your budget is set, it’s important to review it and your spending on a regular basis to be sure you are staying on track.


Few elements of your budget are set in stone: You may get a raise, your expenses may change or you may reach a goal and want to plan for a new one. Whatever the reason, get into the habit of regularly checking in with your budget following the steps above.


Don't jeopardize your finances and retirement while helping your child. It may be tempting to pay your child's student loans or cell phone bill, but do so only when it doesn't negatively impact your own plans. If you make big sacrifices for your child now, you may find yourself facing your own financial challenges in retirement. Remember, you are working toward a major goal: financial independence and financial freedom.


Happy budgeting!

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