Budgeting can be a very divisive topic, especially amongst young people. The term has taken on a largely negative connotation (probably due to the previous generation’s language around it, with the popular phrase “money doesn’t grow on trees” forever etched into millennials’ minds’). However, the truth about budgeting is that it’s your gateway to real financial freedom. When you’re intentional about doing a budget, you’re setting yourself up to use your money on the things that are most important to you, which gives you zero guilt and full freedom!
We’ve compiled a short list of budgeting techniques that could you be your next step to a healthier financial life. Let’s look at them.
Our favourite! It’s also (we think) the best way to do both personal and business budgeting. In business, a zero-based budget assumes that the starting point is zero, and everything needed from there should be justified and motivated. This can help curb unnecessary spending in a company, especially during something like the pandemic we’ve just experienced.
In personal life, a zero-based budget means that when you minus your total expenses from your total monthly income, you should see a zero. This doesn’t mean that you have no money in your account, but rather, it means that you’ve given every Rand a purpose, down to the cent. No leftovers, no floating bucks, no opportunities to squander your cash. Every Rand is made useful, which helps you to spend less on frivolous things, and more on the things that matter.
The Envelope System
A more personal (and possibly savvy) type of monthly budgeting, the Envelope System is a way to help curb unnecessary spending throughout the month by allocating certain amounts of money to specific things that you’re going to need, and then drawing that money as cash and placing it in the various envelopes dedicated to those things that you’re going to need. When you’ve used up the cash in a certain envelope, you don’t spend any more money on that thing for the rest of the month.
The whole idea behind this way of money management is that physical cash is perceived by our brains as more real than anything on our banking apps, so in essence cash is king. If you find it too easy to spend money that’s in your account, this might be a good option for you to start with.
This budgeting technique is based on managing your money in percentages, with 50% going towards your needs like food and housing, 30% going towards wants like a new bike or a fancy meal, and the remaining 20% going towards savings. This may work for you if you’re a percentages kind of person, and the simplicity of it makes it quite easy to follow. It could even be fun!
Take Your Pick
There are a few more ways to compile your budget, but we think these are some good options to start with as you begin your walk to guilt-free financial freedom.