Sophie is confident that she is in control of her finances now that she has used the envelope method for a month. Themba says it is now time for them to create her budget. That way they will know if she is spending and saving the correct amounts. Sophie takes out all her envelopes and puts them in front of Themba.
| Item | Expense Z$ | Income Z$ | Total Z$ |
|---|---|---|---|
| Net Salary after deductions | Z$500.00 | Z$500.00 | |
| Fixed Expenses | |||
| Rent Paid | Z$1000.00 | ||
| Burial Society Fee | Z$60.00 | ||
| ABC Appliances – TV on HP | Z$200.00 | ||
| TV License | Z$20.00 | ||
| Micro-loan | Z$300.00 | ||
| Clothing Account | 200.00 | ||
| Cellphone | 150.00 | ||
| Contract Saving | 100.00 | ||
| Total Fixed Expenses | 200.00 | ||
| 50.00 | |||
| Variable Expenses | 500.00 | ||
| Electricity | 150.00 | ||
| Water | 200.00 | ||
| Groceries | 180.00 | ||
| Convenience Foods (Take-aways) | |||
| Transport (Taxi/Bus) | |||
| Entertainment | |||
| Total Variable Expenses | |||
| Irregular Expenses | |||
| Medical Expenses | |||
| Household Repairs | |||
| Gifts for Christmas | |||
| Total Irregular Expenses | |||
| Total Expenses | |||
| Still Needed |
Sophie cannot believe that she overspent by ZWL230.00 that month! Let’s look at what Sophie can do to prevent this.
Earn more money
Sophie can find another job on the day of the week she doesn’t work
Reduce Debt
Sophie still has outstanding debt on the TV she bought on HP, the loan from the micro loan, and her clothing account. Her total debt per month is ZWL700.00. This is 20% of her net income. She could free up some money if she pays her debt off quicker. 20% is high and Sophie needs to reduce this as soon as possible. The micro loan charges a lot of interest, so Sophie needs to pay this off quickly. Once she has paid that then her budget will be more manageable.