In order to set up a budget, you need to create a spreadsheet template that outlines your income and expenses. Then you need to channel your inner high school maths teacher and fill it in correctly.
But this is clearly outside of many people’s comfort zones and, as a result, they avoid budgeting. We find out whether there are less intimidating ways to do this each month.
Tip: Some banking apps offer built-in budgeting tools. Click here to compare banking accounts.
Why is budgeting so difficult?
According to Duann Cronje, certified financial planner at Fiscal Private Client Services, everyone is on their own path, and this is true for your money journey too.
He believes that the best thing you can do for yourself is set a budget and keep practising the discipline of sticking to it.
“It’s a bit like being on a diet to shed unnecessary kilograms – it can be difficult to change your daily eating habits. Similarly, the numbers on a spreadsheet will mean nothing if you don’t follow through with curbing unnecessary daily spending,” says Cronje.
But this is challenging, especially when you shut off every time you hear the word “spreadsheet”. People struggle to stick to a budget because they rarely get to the point of drawing one up.
Cronje says that the good news is that once you start seeing the benefits you will enjoy the results of a new and rewarding way of life. But perhaps there’s a way around the spreadsheets that will improve your enthusiasm for budgets before you even have to venture into this territory?
“At the end of the day, the money decisions you make today will impact on your financial situation tomorrow. If you spend less than you earn, even the toughest of times will not last,” says Cronje.
READ MORE: Four steps to rethinking your budget
Three alternatives to traditional budgeting
There are, in fact, different ways to budgeting that don’t seem as dry as adding up numbers with complicated equations. Here are the top three alternatives you could consider:
1. Envelope budgeting
Why not go old-school when it comes to budgeting? After allowing your debit orders to go off and transferring your savings or investments to their appropriate accounts, withdraw the remaining amount you’ll need to spend on groceries, transport, utilities, and entertainment.
You can then create an envelope for each of these categories, and physically place the amount of money you’re willing to spend on each inside of its respective envelope. Then, whenever you go to the shops or out with your friends or family, only take along money from the correct envelope and leave your bank card at home.
This will prevent you from spending money outside of what you planned, and you will not be tempted to use money that was actually assigned to a different category – such as using food money for entertainment.
2. Dual bank account budgeting
According to Cronje, “pay yourself first” is a widely used phrase which means, before spending your hard-earned money, make sure you have put a portion aside for savings and investments. He adds that not doing this is a common mistake made by many who are battling to save and invest.
To help you overcome this, you can open a second bank account and literally “pay yourself first”. Even though this will leave you to your own devices when it comes to the remainder of your spending, you’ll at least know that you’re saving a decent portion of your income each month.
Over time, your savings will likely increase, and you may become inspired to take on additional budgeting techniques that will help you save even more! You can compare savings accounts here.
3. Mobile budgeting
In a press release, Sisa Cikido, head of retail investments at Nedbank, explains that mobile budgeting apps are surprisingly effective in helping you track your spending.
“A good app can be a powerful tool in not only reducing unnecessary spending, but also uncovering great investment opportunities without feeling a major strain on your quality of life,” says Cikido.
Nowadays, the majority of banks offer some kind of budgeting tool. You only need locate it on your chosen banking app and start using it. The bright side of this kind of budgeting is that it does all the maths for you, and you can easily call your bank if you have trouble understanding their calculations.
With this in mind, you’ll be able to see exactly where your money is going and you’ll be able to think twice before making similar purchases the following month.
“You can always do more to bring your living expenses down. Even a small change can add up over a year. Stick to the new budget and put your savings to work in your investment vehicle,” says Cikido.
You can also make use of our budgeting calculator by clicking here.