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Budget savvy steps to survive 2022

How is your budget looking right now? We’ve all survived what is considered to be the most stressful month of the year. But, with 11 long months still to go, now is a good time to sit down and take a long, hard and honest look at your personal budget to assess your income versus your expenses.

Being savvy means having or showing perception, comprehension, or shrewdness, especially in practical matters. Since there’s nothing more practical than how you handle your money matters, being budget savvy in 2022 should be a priority for all of us. Understanding the basics of compiling a budget sheet and knowing where your money is spent each month is a good place to start.

Step 1: List your income – all the money that comes into your account, such as your salary and any other sources of income you might have – in the first column, and your expenses in an adjacent column. It is advisable to divide your expenses into two categories: fixed monthly expenses and variable costs.

Fixed monthly expenses include costs you need to cover such as a home loan or rent, utilities, vehicle loan, school fees, credit card payments, medical aid and other insurance fees, and a gym or cellphone contract as examples. Variable expenses include groceries, transport costs, medical expenses, entertainment, clothing, airtime and so on. It is important to list everything you spend money on during the month to get an honest and accurate picture of your current financial situation.

Step 2: Analyse all your expenses, line by line, and look for opportunities where you could cut back on costs and even make some savings. Maybe it’s only getting a take-away dinner once a month or cancelling that gym contract you don’t use. Try and use the monthly savings to pay off expensive debts or loans or top up a savings account – even a small amount saved each month can add up to make a difference over time. Putting some savings into an emergency savings account for an unexpected expense is also a good idea.

“It is a common rule among financial advisors to try and save up to 20% of your monthly income. While this might seem a daunting amount in the current economic climate, even 5% is a good start. Putting aside an amount on a regular basis should become a habit rather than a random act, and it will give you a sense of accomplishment when you see the balance growing,” says Kutlwano Mogatusi, WesBank Motor’s Communications Specialist.

“Paying off loans and debts is another important area of managing your budget. Interest charges on borrowed money is referred to as expensive money, and the sooner you can wipe your budget slate free of debt, the better.”

Step 3: List all your loans and debts in a separate column and carefully analyse each one. It makes financial sense to start paying off the most expensive debts first, working your way down to payments of minimum monthly instalments – and paying a little bit extra will reduce the amount owing.

“If you are having trouble meeting your debt repayments, reach out to the lender or financial house as soon as possible to discuss a minimum payment solution. It is always better to pay something than miss a payment altogether to avoid a payment default or judgement against you that could negatively impact your personal credit score,” comments Mogatusi.

Step 4: Check your credit score. This is based on your credit report, which lists your credit history including payments and active accounts over a 24-month period. You can request a free copy of your credit report once a year from a reputable online vendor to check how you’ve managed your finances in the past as lenders will check this to assess your level of risk when you apply for future credit.

If you haven’t prepared a budget for 2022, right now is the perfect time to start – understand your current financial situation and forecast your expenses for the year to effectively manage your monthly spending and saving as best you can. Being budget savvy can help you achieve your goal of financial fitness.

“Where possible, try to make consistent savings – no matter how small the amount – a priority, and set clear and achievable goals that you can work towards. The time is now to take that first important step towards achieving a debt-free budget, gathering a savings nest-egg and becoming financially independent,” says Mogatusi.