The Sunday Mail
A budget is a plan that helps you get a picture of how much money you receive every month and where it is spent.
It’s a way for people to work out how much money they are getting from their various income sources and how they plan to spend it responsibly, explains Dhashni Naidoo, programme manager at FNB Consumer Education. Therefore, budgeting is encouraged as a tool to structure one’s finances to ensure that you plan for expenses and savings.
“If people are not aware of the importance of a budget or do not track their income and expenses, then it is unlikely that they will be able to manage their money effectively to save for their short- and medium-term goals,” says Naidoo.
“Saving should be included in your budget as one of your expenses — budget-to-save. It is about planning to ensure that savings are incorporated into your budget for different savings goals and that you also plan to find ways to manage your spending in a manner that can free up some cash in order for you to save more.”
The starting point for budgeting-to-save is planning and developing the habit.
“In this digital age, there are many financial institutions that offer free budgeting tools. Look around and find one that suits your needs and preferences. These tools can help you with budgeting for your different goals, and each month you can track how far you are in order to motivate you to stay the course or to increase your savings,” suggests Naidoo.
How to budget to save:
Create and manage a budget
While this seems like an obvious task, many people do not put their budget on paper or, in recent digital times, on apps or spreadsheets.
It is important to write down all your income, expenses (covering both needs and wants) in order to have a clear picture of your finances. This picture enables you to see where your money is going and if you can cut back on some non-essential spending in order to put this money toward your savings.
Define your savings goals
It is important to have a clear vision why you need to save and what you want to save for.
Answering both these questions is significant because working toward goals helps us stay committed and it motivates you to remain disciplined in order to reach them. For instance, you may decide that your short- and medium-term savings goals are to save for a fridge and a 3-month emergency fund respectively.
Include savings in your budget
Including savings as part of the budget helps us to develop a habit of putting money away. When you write down your needs or expenses in your budget, include savings as part of your expenses. This way you will not be tempted to save only what is left at the end of the month.
Automate your savings
One of the ways to be disciplined about your savings is to automate your savings. You can do this by what is called “forced” or contract saving. This is where you agree with a financial services provider to take a certain amount from your account on the day that you get paid and put it into a savings product.
This is also known as using a stop-order or similar automatic instruction to move the money into a savings account, which means that you won’t be tempted to spend it. – fin24.com
