Creating a personal budget based on your income and spending is more important than ever and the time to start is now.

Maintaining your budget, says Standard Bank, can lead to both financial security and freedom. A good budget helps you prioritise your spending and stay on top of your monthly expenses and loan repayments.

Setting up a budget gives you a clear idea of what’s coming in and going out of your account. More importantly, knowing your interest rate on all your loans can help you decide which loans to pay off quicker to have more control of your cashflow.

Make extra payments on your instalments into your loan with the highest interest rate, to reduce total debt obligations. For example, a loan of R10 000 over 24 months, at an interest rate of 20.5%, with a repayment of R642.16 will incur a total interest of R2548.34. By increasing your instalment by R100, the term reduces to 20 months and interest to R2045.67

Having a budget is only the first step. The next step is to ensure that you keep it accurate and regularly updated based on how your financial situation changes.

Standard Bank offers these personal budgeting tips to help you gain control over your money:

  • Collate all your information: Start with your net salary – the amount that comes into your account every month. Then list all your expenses.
  • Make some changes: Divide your expenses into two categories: fixed (rent or bond) and flexible (groceries). Cut out some unnecessary flexible items such as buying coffee or lunch every day.
  • Know the interest rate on all your debts: This will help you decide which debts to pay off first. You can also make extra payments on your instalments on the debt with the highest interest rate, to reduce total debt obligations.
  • Be committed: Write your budget down and pin it up somewhere you’ll see it on a regular basis.
  • Know your credit status: you can get one free credit bureau report a year.
  • Regular checks: There are apps to help you track your budget as you spend daily. Your budget should remain a work in progress, which you continually adjust to suit your changing lifestyle.

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