Create a budget to make better money choices

Have you ever had that sinking feeling when you pay for something and realise that you don't have enough money? That's happened to all of us at least a few times in our life, so there's no shame in accidently misjudging your wealth.

However, if this is something that happens to you a lot, it's clear that you're not sticking to your budget. It means that you're literally spending more money than what you have – a situation that is not sustainable, but also not insurmountable.

Creating and sticking to a budget is the only way to get control over your finances. Read on if you want to learn how to set up a budget so that you can improve your money management. What follows is not a tutorial on how to stick to a budget. That's a whole different conversation and science on its own. Right now, we want you to walk away with the confidence knowing that you can control your spending.

What is a budget?

At its most simple, a budget is nothing more than a tool to help you plan properly and spend wisely. You don't even need a computer or a calculator to put together an effective budget. A piece of paper and simple maths is all you need – although, it's just as easy to use the MoneyTracker feature on the Nedbank Money app or Online Banking. 

The most important thing that a budget does is force you to come to grips with how much money you spend and what you spend it on. Once confronted with a list of your income and expenses, you can make changes to get a different outcome.

How to start a budget

Getting started is easy – all you need is piece of paper and a pen. Split the page into three columns and write ‘Item’ in the first, ‘Current’ in the second and ‘Revised’ in the last column.

The idea is to list, from the top, all your income – your take-home salary, plus income from rent or a side hustle, as well as your monthly expenses. Start with listing all your monthly income and then add that up. Now, write down a list of regular, essential expenses that you need to pay every month – these are called your ‘fixed costs’:

  • Rent or bond payment
  • Utilities and rates and taxes
  • Medical aid
  • Debt repayments
  • Groceries
  • School fees
  • Insurance
  • Housekeeping costs
  • Policies, savings and investments

‘Variable costs’ are those that can change every month, but some of these are also essential:

  • Telephone
  • Internet
  • Travel costs
  • Pets
  • Home entertainment
  • Clothing
  • Maintenance and repairs


Only you have the power to control your spending, and there’s not a more useful tool than a budget to help keep you honest


Lastly, list your non-essential expenses:

  • Entertainment
  • Eat-in and snacks
  • Luxuries and extravagances

You can use this list as a starting point, but you might want to be more detailed to see exactly where you’re spending your money. Home entertainment, for example, could be broken down into costs for DStv, Netflix, Spotify and Amazon Prime. The more detail you have, the easier it is to see where you can cut costs.

What you have now is the beginning of your budget.

How to use your budget

Now that you've listed all your income and expenses, see what the numbers say and subtract the total of your expenses from the total of your income.

If you have a balanced budget, which is rare, then the answer would be R0,00. If you're lucky, you'll end up with a positive balance, and if you've been honest you might end up with a negative balance.

Whatever the results, you now have information you can work with. For example, if you have a positive balance, you now know you have this amount available every month to put into a savings account.

On the other hand, a negative balance means you're spending more than you earn, which is what the third column is for. Here you can enter new amounts as you figure out where you can cut your monthly costs.

This may be a brutal exercise if you're confronted with cutting beloved but unjustified expenses, like a club membership or your weekly flutter on sports betting. The trick is to keep your end goal in mind and to suffer the small cuts to achieve your bigger goals.

Use your budget to track your progress

With your basic budget ready, you can now use it to track your monthly progress.

List the expenses for each month in a list where you can see your planned costs (your budget) and the costs for the previous month. This will help you see if you’re still on track. If you’re not, you will have to double down next month so that you budget stays on track.

Only you have the power to control your spending, and there’s not a more useful tool than a budget to help keep you honest. Sit down today to plot your own budget and financial future.