It’s true that you can’t always control what comes your way, financially speaking. But, it is important to continually try and manage that which you can – your own and personal money situation. You can do this by using your BUDGET, the key tool needed, to effectively ‘control’ your debt/finances every month. And, while you may face various obstacles from time to time, you can try and ‘steer’ or amend your budget outline accordingly.
Understanding your budget and learning from it can help you to face your financial encounters hands-on and, in the end, assist you to stay clear of debt.
Knowledge is power so think of a budget as a book about your finances. And, just like reading a book can increase your knowledge about something, so can your learning about your budget help to increase your understanding of your specific financial situation.
The more you increase your knowledge, for example by revising your budget, the more power you gain to improve your personal financial decisions and outcomes while facing those expected, or unexpected, financial and debt hurdles,” explains Oberholzer.
So, where do you start when it comes to a budget? Below are four insightful tips that can help you to get your personal budget going, and making it a continuous routine in YOUR life so that you can stay (or become) debt free:
- Start with your budget by outlining and structuring it according to your needs and lifestyle.
- You have to know your: net income amount (after deductions such as UIF or a pension fund), your expenses (deductions such as credit agreements, service agreements, scheduled debit orders, etc.), and if your end balance is reflecting a minus or surplus amount (so that you can lay out a plan to change it, or keep it as is).
- Do what works for you. You can write your budget down on a piece of paper and stick it to the fridge, you can use a phone app to assist (since you use it regularly), or you can use a free, user-friendly online template to fill in the necessary details on your computer/laptop. Remember to add the information that reflects YOUR current situation.
Next, monitor your income and expenses for a month or three weeks – this will show you if/how external events (for example, fuel hikes and food prices) have impacted your cash flow as a consumer. As you monitor your cash flow, keep your budget plan up to date:
- Add solutions to boost your income/up your savings. Or, cut on luxuries, lowering expenses, or your debt.
- And, identify or add solutions to your unhealthy financial behaviour/habits (and situations or people that trigger you into losing money to your budget).
The most important thing to do when it comes to budgeting is to stick to your budget. Celebrate your budgeting milestones (paying off a debt account, upping your income, successfully cutting out over-the-top spending, etc.).
This will make budgeting a part of your regular (and second nature) financial habits. Rewards can range from something like a R100 spoil on anything that you wish, to a date night with your significant other. Get creative (though realistic) on what you can add.
And lastly, budget evaluation is key. You have to revise your budget at least every second month to see where you have to make adjustments as your life and lifestyle take a few turns. You will also be able to spot if you are over-indebted (when your balance is reflecting a minus amount) and can then add additional debt management solutions to your budgeting goals.
Remember, there is nothing wrong with getting some extra help to assist you in reaching your budgeting/financial goals. There are financial planners or debt experts that can assist, and online/broadcast platforms that you can start using immediately. Do your research well, and again – find the help and solutions that can work for YOU.
Your budget tells or reflects something about your finances. It is, therefore, critical to thoughtfully manage your money situation by compiling a budget, keeping at it, and continue taking care of it (in other words, to rework and revise it). By doing this you can surely face financial challenges, fix debt where you need to, or ideally, try and keep as far away from debt as possible (no matter your change in circumstances).
Carla Oberholzer is a debt adviser at DebtSafe.
*The views expressed here are not necessarily those of IOL or title sites.
PERSONAL FINANCE