A new year is nearly upon us, and with it comes the chance to start fresh and make some changes in our lives. Plotting a budget for 2017 should be your first port of call.
There is nothing worse than moving toward the end of the month only to discover that you have to start eating crackers to survive. What is even more daunting is starting a new month on an empty bank account. Too many of us are living from one pay cheque to the next.
Budgeting is the core to all financial planning. Without a budget, it is impossible to curb your expenditure and even more difficult to think about saving. Budgeting is simply inflows versus outflows, and your outflows should never be more than your inflows.
Now is the perfect time to reassess your budget, with the festive season drawing near and the New Year around the corner. Here are some tips to fixing your budget for 2017:
1. Assess your fixed expenses
Fixed expenses are fairly constant every month, such as bond repayments/rent, car repayments, bank charges and so on. You may try and negotiate a lower fee on your bank charges and some other fixed expenses, but generally there is very little manoeuvrability when it comes to fixed expenses. But, by determining what your fixed expenses are first, you are able to determine what you have left for other expenses.
Related: 6 Easy steps to improve your personal finances for a better future
2. Identify your variable expenses
With variable expenses, it is far easier to cut down, like shopping in bulk rather than stopping at the local convenience store every day. There are many ways to cut down on variable expenses, but, what is of vital importance is to document these variable expenses and then compare them from month to month. That way, not only will it illustrate wasteful expenditure, but you will also see, in black and white, the decrease in these expenses.
Money Tip: With the festive season around the corner, start buying presents now rather than waiting for December. Prices tend to go up closer to December and by starting now, you are able to save a little more.
3. Build an emergency fund
It is vitally important to build an emergency fund for unforeseen expenditure, such as medical expenses, school expenses or car repairs. Nothing kills a budget like unforeseen expenses, which can be compounded by paying with your credit card.
You ideally should have approximately three times your monthly salary saved in an emergency fund. It won’t happen overnight, but make it your goal.
4. Make some savings
Our pay cheque comes in, and every month we pay out our expenses. The last person we pay is ourselves. Make savings a non-negotiable part of your budget. The easiest way to do this, is to set aside a consistent amount that is debited from your account every month.
See it as part of your fixed expenses, then split these savings into short, medium and long-term savings. Short-term savings for those expenses in the next year or two, such as holidays, medium-term savings such as children’s education and long-term savings for retirement.
Related: 10 Budgeting mistakes to avoid
5. Maximise your bonus
If you are expecting a bonus in December, spoil yourself, but within reason. Being smart with your bonus will take a lot of pressure off your budget in the New Year.
There are still two months left before the end of the year. Reassessing your budget now will enable you to refine your budget by the time the new year begins. Remember, to stick to your budget and continually review and assess it. If you find it challenging to budget on your own, seek assistance from a certified financial planner.