Sophie says that she battles to remember what she has spent each month. This makes it hard for her to review her budget because she doesn’t know what her actual expenses are. Themba has an easy way for Sophie to keep track of what she spends.

TIPS TO DECREASE EXPENSES
Pack lunch for work instead of buying lunch Stop smoking Re evaluate your cellphone costs to ensure that you are still on the most appropriate package for your needs Save electricity by turning off any unused appliances or lights

Themba tells Sophie to do the following:

• Take envelopes and label them with the main categories you spend your money on. For example, fixed expenses, transport, clothing, groceries, etc.
• Everyday sort out your receipts and place them into the categorized envelope. If you don’t have a receipt, then make your own and record what you spent, where and what you bought. You can make a new envelope if a receipt doesn’t fit into one of your categories.
• At the end of the month, add your receipts and write the total on the front of the envelope.
• Review what you have spent your money on. Was it necessary? Be honest with yourself. How much of your spending was actually on needs?

Sophie needs to know what her expenses are so she can manage them. It is easy to lose track of expenses, because we don’t always use cash. Sophie could also download a cellphone application that can help her keep track of her money. By keeping a journal, using the envelopes or using a cellphone app to keep track of expenses, Sophie will know where she spends her money. Sophie will also be able to decide if she spends on wants or needs and if they are fixed or variable expenses.

Once she has done this, she will be able to see where and how she can decrease/manage her spending. Themba tells Sophie to use the envelopes for a month and then come back to see him.

Budgeting Tips

Be realistic about your budget

Realistically forecast how much money you will be earning and how much you think you will be spending.
The more truthful you are about the numbers the more likely you are to stick to your budget.

Differentiate between needs and wants in your budget

Divide your budget into needs and wants. This will help you prioritize items on your budget so that you
spend mostly on needs and only spend on wants if there is money left over.

Include savings as an expense

Decide on the amount you are able to save each month and list it as an expense.

Align your budget with your goals

When you have completed your budget, study it and see if what you are spending is in line with your short, medium or long term goals.

Review your budget regularly

Don’t think that knowing more or less what you earn and spend is good enough. To be in control of your Review your budget regularly As your needs and wants change so will your budget. Review it regularly to ensure what you actually spent was what you budgeted for.

Keep all your receipts

Keep track of your spending by keeping all your receipts or go through your bank statement.

Forgive yourself for a little bit of extra spending

You will probably not follow your budget 100% every month. Budget for ‘spoils’ or luxury items too as this will keep you on track and you will not feel deprived.