Michelle Vogt, an accountant and financial advisor at the Circufin Group of Companies in Nelspruit, advises on the importance and benefits of budgeting.
Many people will tell you there is not a right or wrong way to budget, as long as you have one. I respectfully disagree.
After working with individuals and families from all walks of life, I have found that most people either do not have a budget at all, or they have one that does not accurately reflect their spending. They forget about the little expenses that quietly eat away at their income every month.
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So, what is the right way to budget?
I am going to get a little technical first, and then I will leave you with some practical steps you can start implementing today.
One budgeting method I really like is personal-finance consultant Dave Ramsey’s percentage-based approach. While these percentages are not always realistic in today’s economy, they provide an excellent benchmark to compare your own spending and identify areas where you may be overspending.
Let us use a net salary of R10 000 per month as an example.
- Housing (bond/rent, rates and taxes): 25% = R2 500
- Utilities: Up to 10% = R1 000
- Food: 10 – 15% = R1 000 – R1 500
- Transportation: 10 – 15% = R1 000 – R1 500
- Medical aid: Around 10% = R1 000
- Insurance: Approximately 10% (depending on your stage of life) = R1 000
- Personal and lifestyle: 5% = R500
- Giving: 10% = R1 000
- Savings: 10% = R1 000 (increase this once you are out of debt)
Another important guideline is that your total monthly debt repayments should ideally not exceed 36% of your income. This is not another expense to add to your budget – it is simply a limit that helps protect your financial health and credit profile.
Now, if you have added everything, you have probably realised something: for many South African families, these percentages simply do not fit reality.
And what is the first thing most people cut?
Savings.
Giving.
Then we rely on credit cards, overdrafts and personal loans just to make it through the month.
Unfortunately, that is exactly what keeps us trapped in the cycle of living from paycheck to paycheck.
Budget:
Income: (amount)
| Expenses | Budget | Actual |
| Housing | ||
| Food | ||
| Transport | ||
| Utilities | ||
| Insurance | ||
| Savings | ||
| Debt | ||
| Entertainment | ||
| Other |
So where do we start? Start with the essentials. Your family needs a safe place to live and food on the table. Those come first. I am not talking about luxury, I am talking about the basics. That does not mean buying chocolate spread, sugary cereals and unnecessary treats every week. It means making wise decisions while you are building your financial future.
My own family has walked this journey. There was a season where peanut butter sandwiches became a regular meal because we had bigger goals. We bought what we needed, not always what we wanted. Looking back now, it was one of the best financial decisions we ever made.
Buying in bulk became one of our biggest money-saving strategies. When we had a month with a little extra income, we would stock up on non-perishable groceries that could last two or three months. The following months, we did not need to buy those items again, so the grocery money we saved went straight towards paying off debt.
This created a snowball effect. Every debt we paid off increased our monthly cash flow, allowing us to pay off the next one even faster. We also reduced the amount we were putting into savings for a short period and redirected part of it towards eliminating debt. Once the debt was gone, we simply redirected those monthly payments into savings.
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That is the key. The goal is not to stay in survival mode forever. The goal is to create freedom. Remember, a budget is not there to restrict you. It is there to give your money direction. Every single expense should be included. Every R5 subscription. Every streaming service. Every coffee. Every nail appointment. Every afternoon’s chocolate for the kids. If money leaves your account, it belongs in your budget.
Keep your budget simple. Then, once a week, sit down with your bank statement and compare your actual spending to your budget. If you planned to spend 3% on entertainment but ended up spending 6%, ask yourself where that extra 3% is going to come from.
Your budget should always tell your money where to go, not leave you wondering where it went. Budgeting is not about perfection. It is about awareness.
As a business owner, your budget can do far more than simply track expenses; it can become one of your most powerful planning tools.
By knowing exactly what your monthly expenses are, you can work backwards to determine how much you need to generate in sales each month, each week, and even each day, to cover your costs and still make a profit. Instead of hoping you will have enough money at the end of the month, you create clear financial targets that keep your business moving forward with purpose.
We will dive deeper into how to calculate these sales targets and use your budget as a growth strategy in a future segment.
Small changes, made consistently over time, create financial freedom.
So let us stop fearing the budget and start using it as one of the most powerful tools to build the life we want.
- Michelle Vogt is a director of Circufin.
