We need to look at the following things when we consider our budget:
• Disposable income and where it goes?
• Essential expenses vs. non-essential expenses
• Fixed expenses vs. variable expenses
• Debt
Start now and draft a budget *** Link to the downloadable budget template
Is your budget realistic?
Take a few months to review your budget. It is important that your budget is not only realistic but that you can also stick to it.
Once your budget is set and working for you, it is important to work out your budget for the year ahead and at the end of each month, compare your proposed budget with your actual budget.
If you change the way you spend your money through lifestyle changes, you are on your way to taking control of your situation. If not, no matter how much money you make through your efforts, your ultimate situation will not change. Because as your income changes, so will your lifestyle change.
This is common amongst most people. All that happens when they make more money is their expenses increase.
Let’s consider debt for a moment.
There are a few theories on what to do to eradicate debt. I believe that it ultimately boils down to human behaviour. If you reduce certain debts only to create other debts, what is the point? This is, however, very typical human behaviour.
Here are a few options to consider when it comes to the reduction of your debt.
Option A)
Pay off your shortest-term debt first and once settled move on to your next shortest-term debt thereby increasing your repayment by the amount you were paying on the debt you have just settled.
Option B)
Pay off your highest interest-bearing debt first and once settled move on to your next highest interest-bearing debt thereby increasing your repayment by the amount you were paying on the debt you have just settled.
Option C)
Consolidate all your debt into one. Take your longest term and lowest interest-bearing debt and combine all your monthly repayments and pay this off as quickly as possible.
Whatever you decide, you must service your debt. Do not; under any circumstances create any further debt.
Have a look at the amount of interest you are currently paying, and then decide if the products purchased on credit are worth the total amount you paid for them, i.e., the purchase price plus interest and charges.
Cautionary note: Should you not change your habits, none of the abovementioned options will work as they simply create the opportunity for you to get deeper into debt. Be very careful when you are considering these options and making a decision.
Let’s consider an emergency fund.
What happens when there is an emergency, and you don’t have any savings?
The only option is borrowing money, it’s an emergency after all, but now you have to repay the money, but that’s not all, you have to repay the total cost of credit, and this becomes expensive.
What is an emergency fund?
An emergency fund is a financial safety net for future mishaps and/or unexpected expenses.
An emergency fund is a cash reserve that’s specifically set aside for unplanned expenses or financial emergencies. Some common examples include car repairs, home repairs, medical bills, or a loss of income.
How much should you have in your emergency fund?
Ideally, you should work towards having an amount equal to 3 (three) to 6 (six) months’ worth of income available in an emergency fund, this amount should cover most emergencies.

*** Link to the downloadable budget template