While times are changing so should the way that you manage your finances.
Having a budget is a great way of taking control of your finances because you know exactly where all your money goes and how much money to save while leaving enough money for unexpected expenses.
But if the traditional way of budgeting is not for you there are other options available to you including a cash stuffing and a spending plan.
Cash stuffing
Cash stuffing is where people count their money and then separate the money into envelopes or clear sleeves in a binder. These envelopes or sleeves are labelled with the name of a particular category, such as groceries or fuel.
With cash stuffing, you divide your monthly salary and set aside a portion for your monthly or weekly expenses. It also allows you to save towards a big purchase or your next holiday.
Here is how you can start cash stuffing:
1. Get organised.
Whether you use regular or colourful envelopes or clear sleeves, it is critical to get organised. Have a binder or folder that holds all of your envelopes or sleeves to avoid losing an envelope or the money inside it.
Find a dry and safe place in your home where you can keep all of your envelopes, especially if you have kids in the house.
2. List your categories
Write down a list for categories for your expenses, such as groceries, fuel, and entertainment as well as things that you are saving towards like a new laptop or a car.
Make sure that you have an envelope for your emergency fund that is separate from your savings categories.
3. Know how much to allocate
Get an idea of how much money you need to set aside for each of of your categories by looking at your bank statement so see the value of each of your expenses. After that you can work out how much money you will need to set aside for your savings categories and your emergency fund.
Spending plan
According to Farzana Botha, Segment Solutions Manager at Sanlam Savings, a spending plan sounds so much more appealing than a budget.
“Reframing our mindset from a budget to spending plan instead, may be the right way to positively shift our attitudes toward financial well-being,” Botha said.
Get started
According to Botha, a spending plan details what people need to do with their money each month to meet their financial goals. They can do this by knowing exactly what they you earn and how much they owe.
It is important to draft a list of monthly expenses that includes both fixed expenses such as rent and car payments as well as expenses that fluctuate such as entertainment.
Then they can calculate what comes in every month and what needs to go out.
Know your needs from your wants
A “need” refers to something that is vital, such as your home and food for you and your family while a “want” is something nice-to-have, like that daily take away cappuccino or a takeaway lunch at work.
“It is important to realise the difference and plan for each accordingly. A good exercise is to scan last month’s bank statement and divide all your expenses into what you spent on a need and what you paid for a want,” Botha said.
Kick the bad habits
Identify bad spending habits such as daily cappuccino on the way to work or impulsive online shopping sprees and then develop a plan to overcome them.
Looking through your monthly bank statements should give you clear idea of expenses that you can do away with and which bad spending habits you need to get rid of.
There are apps available that will help you monitor and track your expenses.
If people are unsure about where to start then they should speak to a financial adviser.
Find a budgeting method that works for you
People can choose between the the following budgeting methods:
– 50/30/20 rule: 50% of income should go to needs, 30% to wants, and 20% for saving and debt repayments.
– 80/20 rule: 80% of income is for needs, wants and debts while 20% is strictly allocated for savings.
– 70/20/10 rule: 50% of income goes to needs like rent, groceries, and utilities; 30% for wants such as hobbies, holidays, and eating out; 20% to your savings.
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