A budget is a money plan for the future. It’s about asking yourself:
“How much money do I make every month?”
“How much do I spend every month?” and
“How much do I save every month?”.
It’s about matching what you earn with what you spend and what you save.
Budgets can be drawn up by anyone, at any time. If you earn money weekly, draw up your budget on a weekly basis, before the week begins. If you earn monthly, draw up your budget at the start of every month. You can also make yearly budgets – now that’s good planning!
How To Draw Up A Monthly Budget:
- Start with your income (the money you receive each month). Remember that depending on what you earn, certain amounts can be deducted from your salary for tax, Unemployement Insurance, a medical scheme or a pension. Your income is what you have left. Write it down.
- Then, decide on your savings (the amount you wish to save each month). Everyone wants to save for different things so your amount will be different to someone else’s.
- Determine your fixed costs: costs that applyeach month and don’t change much in between – like rent, insurance, water and electricity.
- Subtract your fixed costs and your desired savings from your income.
- Now look at variable costs (costs that change according to what you need, use and spend), like transport, telephone, food, bank charges and clothing. These are the important costs when planning a healthy budget; they’re also affected by inflation.
- Deduct your variable costs from [income + fixed costs + savings].
- Write down your discretionary costs spent on items you’d like to have but could sacrifice if things got very tough. Like magazines, movies or holidays.
- At the end of each month, compare what you actually spent to what you budgeted for and anticipated spending. This will show you where you may have spent irresponsibly.
Taken from the Jumpstart Handbook