Even with a solid budget in place it is easy to overspend. One of the many reasons for this is an inability to manage spending money efficiently. In order to prevent making new/more debt learn to work with the amount you have.
Spending money is essentially the money you have left after all the must-have (fixed) payments on your budget have been deducted from it. Remember, a healthy budget should account for savings, an emergency fund, retirement contributions, debt repayments etc.
Spending money usually has to fund the variable expenses such as the weekly fresh produce, entertainment, social gatherings/dinner parties, clothing, gifts, and other luxuries. Try the following five practical tips to help you make the most the money you have for this:
1: Divide and concur
Don’t see your spending money as an amount you can just bite chunks out of. This method will surely leave you with zero rand in the third week. Instead:
- Deduct a budgeted amount for all the special occasions you know are happening the month for e.g. birthday parties, gifts, weddings, events etc.
- And then divide the amount that’s left by four. Remember: Some months have five weeks, so plan accordingly
2: Withdraw it in cash
Chances are your spending money will look drastically different after the above has been done, but don’t worry, you can do it. The next step is to withdraw your spending money in cash and to divide it as per your calculations above into various envelopes. There should be four envelopes for the weekly budgets, and a separate envelope containing the set out budget for each “event” or occurrence. If you have a wedding, for example, you’ll have a separate envelope containing the money you’ll need for the wedding gift, cash bar etc.
Tip: If a weekly envelope still has a few rand in at the end of a specific week, add it to an envelope that could do with more.
3: Shop for sales
The key to managing spending money better is to spend less where you can. If you have to buy a gift, shop around until you get a store that has a sale. If you want to go out for dinner, why not go earlier in the week when most restaurants have some type of special? Need a new pair of trousers for work? Why not browse the internet for sales?
4: Always compare prices
When it comes to grocery shopping, every item has a cheaper twin. It is often a store’s own brand, or an item that is less convenient i.e. a tin without the easy-opener, whole vegetables etc. Compare prices and buy items that are just as good but save you a rand or two per product. Ultimately, every rand saved on simple things like the week’s milk is one rand more for you to spend on the weekend’s social for example.
5: Allow yourself to be a little bit stingy
The word stingy has gained itself a bad reputation and probably with good reason if you think of its broader context. However, if South Africans were able to become slightly “stingy” with their spending, the over-indebted status of millions of South Africans would look a whole lot different. Before you buy anything ask yourself if the price justifies what you are getting, and if it doesn’t don’t buy it. If you are shopping for gifts for family and friends don’t spend hundreds of rand because you are trying to look good. No, spend what you can afford or think creatively and give inexpensive do-it-yourself gifts that were inexpensive.
At Debt Rescue it is our motto to help you become debt free and live a financially stable life. If you cannot achieve this on your own due to too much debt holding you down, contact us for debt counselling and tackle your financial future with confidence.