Income and Budgets

Budgeting helps you to:

- Accept limitations of your income so that you can make purchases with certainty. - Be more objective about your financial affairs, as you are able to analyze your income. - Gain insight into your needs. - Spend money purposefully. - Eliminate wasteful spending. - Plan for the future and invest wisely. - Pinpoint faults in your current spending pattern, and allows you to change them.

Too little income, too many expenses.

Deficit.

Too much income, too little expenses.

Surplus.

What is the difference between pension and the provident fund?

The main difference is that if a pension fund member retires, the member gets one third of the total benefit in a cash lump sum and the other two-thirds is paid out in the form of a pension over the rest of the member's life. A provident fund member can get the full benefit paid in a cash lump sum.

Principles of Budgeting

1. Assesses need and objectives. 2. Prepare for unexpected incidents. 3. Control and record spending.

How to Balance a Budget:

1. Cut out unnecessary decisions. 2. Set realistic financial goals. 3. Keep an accurate record of all expenditure. 4. ALWAYS set aside money for unexpected expenses.

Types of Expenses

1. Fixed: specific, regular amounts that don't change from month to month. eg - rent, school fees, cellphone contract. 2. Variable: change often due to certain circumstances, needs or price changes. eg - cosmetics, entertainment, food. 3. Emergency: come up unexpectedly, but have to be paid. eg - hospital or emergency room visits. 4. Savings: amounts that you put into the bank on a regular basis.

Benefits of Financial Planning

1. Gives you peace of mind. 2. Increases feeling of self-worth. 3. Gives you a sense of responsibility. 4. Ensures a positive bank balance. 5. Improves health and wealth. 6. Gives you freedom from debt. 7. Gives you prosperity.

Household Budgeting

1. Involve all family members. 2. Specify the budget to the individuals. 3. Be realistic and estimate correctly. 4. Good communication about budget in the family. 5. Understand the role that budgeting plays I'm household goals. 6. Be flexible to provide for unexpected expenses. 7. Make provision for long-term plans 8. Consider the effect your choices have on the environment. 9. Good record system of income and expenses is essential.

Why should you budget?

1. It allows you to see expenses objectively and allows you to save. 2. Helps you to set goals and have money for rainy days. 3. Prevents debt and helps you to control the money you spend. 4. It shows you how much credit you can afford.

Steps to Budgeting

1. List anticipated income. 2. Estimate your expenses. 3. Compare income and expenditure. 4. Evaluate budget.

Sources of Income

1. Salaries and Wages. 2. Rental Income. 3. Social Grants. 4. Friends and Family. 5. Pension. 6. Business profits and investments. 7. Casual Wages. 8. Unemployment Insurance Fund. (UIF)

Budgeting for your Life Cycle

1. Single Young Adult: cover the essential expenses, with disposable income left over to travel. 2. Young Couple: be able to purchase your own car and vehicle. 3. Arrival of your First Baby: buy a bigger house to accommodate children as well as a bigger and more family-friendly car. 4. Pre-School Child: good, safe start to education. 5. Primary School Child: be able to pay for extra-murals, medical bills and have left over disposable income for family holidays. 6. Teenagers: be able to afford electronics and a good education. Start saving for varsity. 7. Middle-Aged Couple: start putting away money for a retirement fund, downscale house, be able to live comfortably with no debt. 8. Retired Couple: able to cover essential expenses, as well as medical aid and insurance.

What is a budget?

A budget is planning for future spending. An estimate of income and spending for a set period of time.