Let’s not sugarcoat things, budgeting can be boring. Some people miraculously find a system and stick to it and that’s that. Others try out a whole bunch of tactics and figure it out along the way. But, there are many people who are completely clueless and are at the start of their financial journey. Whether you want to try something new or you’re starting afresh check out our favourite budgeting strategies below:
Zero-based budgeting
A zero-based budget is simply a budget plan that allocates every cent of your money to a spending category. This method requires you to sit down and put together a comprehensive plan of what your monthly spending and savings looks like. With zero-based budgeting you know exactly what you’re doing with your money, so when you need to plan for that overseas holiday or birthday bash you can easily navigate reallocating your spending. This type of budget can be restrictive, so it’s not right for everyone – but it helps with avoiding overspending, and meeting goals including debt repayment.
Ratio budgeting or the 50/30/20 budget
This budgeting system works well for someone who wants to save for a few very specific things like buying a house or starting a business. Using this system means that 50% of your income will cover all of your essential expenses (rent/bond payments, medical aid, groceries), 30% of your income is allocated to your personal expenses (eating out, personal products, new clothes) and 20% goes to savings. Of course a 50/30/20 ratio doesn’t work perfectly for everyone so you can adjust the ratio to suit your needs, it’s a great starting point when you first dive into the world of budgeting. With this method you’ll have a lot more flexibility – but may still up spending irresponsibly in some areas. Automating savings is key to making this budget work so you don’t ever shortchange yourself.
“Pay yourself first” budget
In the “pay yourself first” method you decide how much you will save, put your savings in the relevant accounts and then the remaining amount is left up to you to decide on how you want to spend it. As you can see this system truly doesn’t require much planning. This system is better suited to people who are already good at staying on budget and maybe earn a higher income and have more disposable income to be flexible with. For those that don’t earn an incredibly high income but use this method – it’s great to save first then spend but then you may also spend irresponsibly and run out of cash before payday. You also have no clue how much you are spending on what and can’t see where your money is going.
Ultimately you must choose a budgeting system that works for you and your needs.
