e Per­cent­age Bud­get

Cosmopolitan (South Africa) - - MONEY -

If you’re laid-back yet money-con­scious, this bud­get lets you man­age spend­ing with­out check­ing your bal­ance with ev­ery swipe of the credit or debit card. First, di­vide your ex­penses into fixed costs, fi­nan­cial goals and flex­i­ble spend­ing. The goal is to have 50% cover fixed costs (hous­ing, trans­port and debt ), about 20% for fi­nan­cial goals (sav­ings and re­tire­ment), and about 30% for flex­i­ble spend­ing (your day-to-day liv­ing). Our hy­po­thet­i­cal friend Dana gives it a go:

FIXED COSTS

Dana earns R420 000 (R334 800 af­ter tax) and gets paid R27 900 monthly (af­ter tax). She pays R10 500 a month for rent and util­i­ties, and R5 500 for her car pay­ment, in­sur­ance and petrol. An ad­di­tional R2 000 goes to­wards stu­dent loans. Her fixed ex­penses cost her R18 000 each month, ap­prox­i­mately 64,5% of her pay­cheque.

FI­NAN­CIAL GOALS

With the R27 900 that hits her ac­count each month af­ter tax, Dana tucks away five per­cent of her in­come (R1 400) into a re­tire­ment an­nu­ity and R2 000 a month (or about 7,2% of her pay­cheque) into a sav­ings fund, with the goal of sav­ing up six months of liv­ing ex­penses. Keep in mind: re­tire­ment con­tri­bu­tions should be out of sight, out of mind. Which means Dana puts a to­tal of about 12,2% of her money to­wards fi­nan­cial goals. If Dana saved the ideal 20% of her pay­cheque (R5 580 a month) in­stead of 12,2%, it would leave her with only R4 320 a month to spend on dayto-day liv­ing ex­penses – a fig­ure that’s doable but not the most re­al­is­tic.

FLEX­I­BLE SPEND­ING

Dana leaves 23,3% (or R6 500) for flex­i­ble spend­ing. If she gets the pro­mo­tion and raise she’s work­ing to­wards, she plans to keep her fixed ex­penses and the R6 500 for flex­i­ble spend­ing the same, then put the dif­fer­ence to­wards her fi­nan­cial goals, mak­ing her per­cent­ages align more with her ideal bud­get.

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