Are you stressed about tracking and managing your money every month?
A good strategy to help you track your spending and tell your money where to go is to plan and budget.
What is a budget?
A budget is a written plan that lists how much income you earn and how much you spend weekly or monthly. Examples of an income include salary, commission, rental income, profit from a business or allowance from a spouse (if married) or from family and friends. Examples of expenses include groceries, personal care, transport, school fees, rent expenses, water and electricity, data and DSTV.
How to budget effectively?
Being able to plan and manage your money starts with budgeting. Below I discuss two strategies to help you get started.
50-30-20 Budgeting Technique
This budgeting strategy helps you find a healthy balance by allocating 50% of your income to needs, 30% to wants and 20% towards savings and investments. For example, if you earn a net income of LSL3 000 per month, you can allocate it as follows.
- LSL1 500 will be allocated to needs i.e. groceries, rent, transport, water and electricity.
- LSL900 will be allocated to wants and lifestyle i.e.
- LSL600 will be allocated to savings and investments. You can allocate LSL400 to savings and LSL200 towards investments for example.
The Envelop Budgeting System.
Buy a few envelopes and label them with your monthly expenses such as rent, groceries, transport or savings etc. Using your LSL3 000 income, allocate the money into the relevant envelope and track your spending.
The secret to successful budgeting is to spend less than you make, be honest about your spending and make changes where necessary.
‘It is not about having lots of money. It is knowing how to manage it.’ – Anonymous
