How to Create a Budget and Stick to it (2024)

The whole aim of creating a budget is to gain control over your financial life, the overarching benefit of which is (ultimately) financial independence. That’s the dream, isn’t it? Being able to take care of yourself and your family while still being able to afford the things you want. Smart budgeting and having the discipline to stick to “the plan” are habits you need to cultivate if you’re ever to enjoy financial independence; and the earlier you start, the better.

Here are five steps to creating a realistic, yet smart budget that you’ll be able to stick to!

Step 1: Calculate Your Expenses

It’s the simple equation that pretty much determines any individual’s or enterprise’s financial success: money in > (greater than) money out. As such, any budgeting exercise needs to start with a thorough assessment of your expenses, for example:

  • Rent or mortgage payments and rates, etc.
  • Utilities (water, electricity, etc.)
  • Medical aid and medication
  • Home and life insurance
  • Petrol and car insurance
  • School fees
  • Groceries for the home
  • Shopping: toiletries, clothing, gadgets, appliances, etc.
  • Entertainment (everything from movie rentals to eating out)
  • Monthly subscriptions (Netflix, magazines, websites, etc.)
  • Credit card and other debt payments

Be as accurate and detailed as possible in your assessment of your monthly expenses because this will give you a comprehensive picture of where your money is going every month and the areas in which you are needlessly wasting it.

Step 2: Determine Your Income

This should be an easy one, especially if you earn a fixed monthly income. If you freelance, run your own enterprise, or earn commission, you can approximate an average monthly salary by averaging the total income you’ve made over the past year.

Step 3: Create Goals for Saving and for Paying Off Debt

With step 1 and 2 complete, you will be able to see whether you’re on the right side of that equation (money in > money out). If not, this is where you can scrutinize your expense sheet for areas in which you can tighten your belt:

  • Instead of expensive take-out coffee and café-bought lunches, make your own lunch and coffee (in a thermos flask) at home. This can easily save you R100 a day = R500 a working week = R2000 a month.
  • When you go for your weekly grocery shop, be a little thriftier with your spending. Buy in bulk, opt for less expensive brands, and avoid unnecessary spending on items you can do without. This can save you hundreds of Rands every week.
  • Cut back on dining out and instead, help your spouse (or ask them for help) to create a fun and diverse meal plan for the week. If you are a family of four, this can easily save you at least R600 a week = R2400 a month.
  • Instead of going to the shopping mall for entertainment where you’re only likely to succumb to buying temptation, spend more time outdoors. Go for a picnic, a hike, a walk, or to the beach for the day. This can, depending on your spending habits, save you upwards of R1000 per month.

These are just a few ways you can cut back on unnecessary spending and with this extra money in hand you can create a list of goals for saving and paying off debt faster. Allocate portions of your income to (1) a savings account, (2) an emergency fund, (3) retirement contributions, and (4) debt repayment.

Step 4: Record Your Spending Habits and Track Your Progress

Now it’s time to track your progress! Keep a detailed record of your spending habits by writing down every single purchase and deduction that comes off your account. Seriously, don’t even buy a take-away coffee without making note of it. At the end of each month, tally up your expenses and voluntary spends to see how much you’ve managed to improve your habits. Each month, try to do better!

Step 5: Be Realistic!

The secret to sticking to a budget is to be realistic. You’ll only set yourself up for failure if you create a list of impossible goals that don’t allow for any kind of enjoyment. If you allocate a portion of your income for pleasure, as well as for possible unforeseen expenses, you’ll give yourself the breathing room you need to enjoy your life and survive financial bumps, while still accomplishing your goals.

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How to Create a Budget and Stick to it (2024)

FAQs

How to Create a Budget and Stick to it? ›

Key Takeaways. The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.

What is the 50 30 20 budget rule? ›

Key Takeaways. The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.

How to budget and actually stick to it? ›

Let's look at a handful of the fundamentals to get you going.
  1. Gather Financial Statements. ...
  2. Know Monthly Income and Expenses. ...
  3. Calculate Your Budget. ...
  4. Keep Your Saving Goals in Mind. ...
  5. Set Up Auto Draft Payments. ...
  6. Take a Step Back Before Buying Impulse or Large Purchases. ...
  7. Watch Out for the Small Stuff. ...
  8. Use a Budgeting App.
Jul 12, 2024

How to create a personal budget and stick to it? ›

Here are 11 ways to help you stick to your budget so you can jump start your savings, reach your goals and thrive.
  1. Sleep on big purchases. ...
  2. Never spend more than you have. ...
  3. Stick to a lower credit card limit. ...
  4. Budget to zero. ...
  5. Try a no-spend challenge. ...
  6. Stop paying for fees. ...
  7. Plan your meals. ...
  8. Do your grocery shopping online.

Why do I struggle to stick to a budget? ›

Why is sticking to a budget so hard? In our consumer-driven society, the concept of “less is more” has gone by the wayside. We're wired to spend, not to save. People don't like being restricted or told they can't have something that they want.

How much fun money per month? ›

Some experts suggest the magic number is 10% of your monthly income, after taxes. I think the right amount should be somewhere in the range of 5-10% per month. Under this fun money umbrella are trips to the bar, the movies, weekend road trips, spa days, etc.

What is a smart way to budget? ›

Start by determining your take-home (net) income, then take a pulse on your current spending. Finally, apply the 50/30/20 budget principles: 50% toward needs, 30% toward wants and 20% toward savings and debt repayment.

What is the hardest part about sticking to a budget? ›

Sometimes it can be hard to stick to a budget when you lose sight of why you set financial boundaries for yourself in the first place. When you get the urge to veer from your budget and spend impulsively, try to pause and remind yourself of your original goal.

What is a good weekly spending budget? ›

Divvy Up Your Paychecks Based on When Bills Are Due

The goal is to divvy up your paychecks so that you spend $750 a week, or $1,500 every two weeks. This isn't a perfect science, but you'll have a better idea of how much you're spending on just your recurring, fixed expenses each week of the month.

What is a good monthly spending budget? ›

The 50/30/20 rule is a simple way to budget that doesn't involve a lot of detail and may work for some. That rule suggests you should spend 50% of your after-tax pay on needs, 30% on wants, and 20% on savings and paying off debt.

How do I start my own budget? ›

Five simple steps to create and use a budget
  1. Step 1: Estimate your monthly income. ...
  2. Step 2: Identify and estimate your monthly expenses. ...
  3. Step 3: Compare your total estimated income and expenses, and consider your priorities and goals. ...
  4. Step 4: Track your spending, and at the end of month, see if you spent what you planned.

How do I make a homemade budget planner? ›

Put a few empty vinyl binder sleeves in the front of the binder to collect receipts. Insert your binder dividers and label them by month. Print a monthly calendar for each month and insert them in each monthly section. Create a monthly budget of your income and expenses in a spreadsheet.

How do you start a budget when you're broke? ›

Here are some tips for building a budget if you don't have one:
  1. Track your income. You should include your salary, any side hustles, and any other sources of income you may have.
  2. Categorize your expenses. ...
  3. Allocate your income. ...
  4. Leave room for flexibility. ...
  5. Track your progress.
Mar 15, 2024

How to create a budget and stick to it template? ›

  1. Step 1: Add up your monthly income. ...
  2. Step 2: Identify and categorize your expenses. ...
  3. Step 3: Get clear about your financial goals. ...
  4. Step 4: Do the math and plan. ...
  5. Step 5: Check in regularly and adjust. ...
  6. 31 passive income ideas: Ways to build wealth. ...
  7. 21 common monthly expenses to include in your budget.
Feb 22, 2024

How to stick to a budget with ADHD? ›

Here are a few suggestions:
  1. Weekly review. Choose a day of the week to be your regular day to review your spending plan and budget. ...
  2. Consider making payments electronically. ...
  3. Savings account. ...
  4. Financial calendar. ...
  5. Money management timeline. ...
  6. Apps to help with money management.

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