03 May 2013
The cost of living is on the increase. Recent petrol and food price hikes have forced many to take a look at their spending habits and identify where to reduce or cut down on monthly expenses.
So, if you haven’t done so yet, you’d benefit from drawing up a budget, says Eunice Sibiya, head of consumer education at FNB.
Sibiya says in today’s age, where the cost of living seems to be going up every month, more and more people are feeling the pinch, and it’s become important to budget so that we have money left over every month for necessities or unexpected costs.
An important part of budgeting is to understand the expenses you have and how to manage them as part of your budget.
“You can track your monthly expenses by looking at your bank statement each month or keeping a diary with all your purchases.
“This is useful if you are unaware of your spending habits and it will help you only spend on things which are set out in your budget,” says Sibiya.
In order to understand your expenses and help you draw up your budget, you have to categorise your living expenses.
There are fixed costs, which will be your debit orders such as bond repayments, rent, loan repayments or school fees and there are variable costs, such as transport, grocery or telephone bills.
The variable costs are there every month, but the amount will differ from month to month, she says.
She suggests cutting down on discretionary costs, or “luxuries,” to help save money.
For example, rent a DVD instead of going out to movies or cut down on restaurant meals and rather cook at home.
“It’s not to say that all luxuries are out the window, if you really want to treat yourself to a pair of shoes or a nice dinner out, you can put it in your budget and plan accordingly.”
You can also cut down on variable costs by switching off unnecessary lights in the house or turning your geyser off if you’re not going to be home for a while.
Instead of making a phone call, send an sms to reduce your phone costs.
Sibiya says that it all boils down to discipline, and knowing that you are in control of your finances, and budgeting is one of the simplest ways to financially empower yourself.
“Everyone can benefit from working with a budget and after a few months the discipline and practice of doing so will help you understand your spending habits, which will in turn help to manage your monthly finances smarter,” she adds.
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