What is a budget?

Budget terms

• A budget is a plan of your income and expenses over a specific period.
• Expenses are all the things you have to pay money for.
• The balance is what is left after you subtract the expenses from the income.

The best way to make sure you spend carefully is to plan your spending and to know at all times exactly what you spend money on.

You plan your spending and saving by drawing up a budget, in which you write down exactly how much money you get in (income) and listing all the things you have to pay for (expenses).

However, sometimes we want things now, and do not want to save for it. A new cellphone now might make you happier than to save money. The problem is, if you do not plan carefully and save for your goals, you might have a new cellphone every year, but you might not have saved enough money for a deposit on a car in five years' time. If you borrow money now to buy something, the same thing will cost you more by the time you have paid it off. For example, if you buy a cellphone of R500 and pay it off, it could cost you R600 in the end, because of interest charges. If you buy it with money you have saved, it will only cost you R500.

A budget will help you plan:

• Your savings.
• Your expected expenses.
• Your unexpected expenses.

A budget will help you to:

• Know what you are actually spending your money on;
• Decide what is important to you and what needs to be changed;
• Plan how to use your money in the future; and
• Take control of your finances.