How to stick to your budget:

So you completed the budget on the last post. Now you have to stick to it. This is the hardest part, every time you walk into the shop you are tempted to spend. How on earth are you planning on avoiding this?

A change of mindset is required. This tip may help:

Most bills should be automatically paid via a debit or stop order, eg mortgage bond, credit cards, insurance, cellphone bills and school fees. If you have not loaded these bills on a debit order system, phone the relevant companies and ask for this to be done. Not only does it ensure you bills are always paid on time but the cost of a debit order transaction is less than half of writing out a cheque or drawing cash.

Debit order paid accounts should be no problem as the money is deducted straight from your bank account as soon after payday as possible. Change the dates if you find you spend the money before it has been taken off your bank account as returned debit orders can be costly and reflect badly on your credit record.

The balance of the budget is where the biggest “cheat areas” are. So make up a set of envelopes mark each one with the name of the expense and the amount you have budgeted for as per the examples shown below.

Envelope 1:                     Envelope 2:                               Envelope 3:
Groceries                        Entertainment                           Gifts
R 5000.00                       R 2000.00                                  R 300.00

In the old days you could put the money in each envelope, but this is too risky in this day and age, not to mention it costs. The transaction fees for swiping your card are much lower than drawing cash.

So instead of carrying cash around carry the empty envelopes. Each time you spend money deduct that amount from the amount written on the envelope and when you reach R 0.00 you have no longer got funds available until payday in that specific area. Try keep your till slips in the envelope related to the spending, that way if you run out of money you can look through your till slips and decide which items you do not really need and next month you can eliminate them from your purchases. (More about this next time)

If you run out of money in an envelope.....
 
Do not “steal” from another envelope!


If you have spent your budget for that activity or area, it is spent and you will make it through the month until payday without any more purchases. Remember that if you carry the envelopes around with you and complete them as you spend you will know when you are reaching the end of your budgeted limit and slow down before you reach the dreaded R 0.00.

Each of your envelopes should look something like this at the end of the month. Hopefully you too have a positive balance.

Sample Envelope

At the end of the month if you have any money left in an envelope use that money to pay off you debts faster, starting with your credit cards. If all your other debts are paid off deposit the amount into your home loan, you will be surprised at the difference it makes both to your minimum monthly instalment or even better if you don’t decrease the minimum payment to the length of the loan.

Make sure your savings, both holiday and general are in a separate bank account which earns interest. That bank account should be a savings account and preferably not have a debit/transaction card. If it does, leave it at home, do not take it with you. A safe is the best place for it to eliminate temptation.