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How to budget on a South African salary

A budget is a plan for your take-home pay before the month starts, so the money goes where you decide rather than where it happens to go. The 50/30/20 rule is a simple place to begin.

Step 1: start from what you actually receive

Budget from your take-home pay, not your salary. A R25 000 salary is not R25 000 to spend: PAYE and UIF come off first, and often a medical aid or pension contribution too. Use the figure on your payslip, or work it out with the take-home pay calculator. If your income changes from month to month, budget on a low month and treat anything above it as extra.

Step 2: the 50/30/20 rule

The rule splits take-home pay into three parts:

• 50% for needs. Things you must pay to live and work: rent or bond, electricity and water, groceries, transport to work, school fees, medical aid, insurance and the minimum payments on your debts.
• 30% for wants. Things you choose: eating out, streaming, clothes beyond the basics, data and airtime above what you need, holidays and gifts.
• 20% for savings and debt. An emergency fund first, then paying off debt faster than the minimum, then saving for longer-term goals.

It is a starting point, not a rule you fail. On a lower salary, needs often take 70% or more, especially with rent and transport. That is normal. Set the split you can manage, perhaps 70/20/10, and move it towards 50/30/20 as your pay rises or a debt is paid off.

Step 3: list every debit order

Debit orders are where budgets leak. Go through three months of bank statements and list every one: insurance, funeral cover, gym, cellphone contract, subscriptions and store accounts. Many people find a policy they forgot about or two that cover the same thing. Put them all under needs or wants, and cancel what you do not use.

Step 4: plan for the whole month, not just payday

• If you are paid around the 25th, the stretch to the next payday is where money runs out. Pay the big fixed costs first, then divide what is left into weekly amounts for groceries and transport.
• Buy prepaid electricity and data in planned amounts rather than when they run out, so they stay inside the budget.
• Plan for the costs that come once a year: school uniforms and stationery in January, vehicle licence renewal, December travel and gifts. Divide each by 12 and set it aside monthly.
• If you support family members, give it its own line. It is a real, regular cost and belongs in the plan, not in whatever is left over.

Step 5: build an emergency fund

Before anything else in the 20%, put money aside for emergencies: a car repair, a medical bill, a month without income. A common target is three months of needs, but start with one month. Keep it in a separate account so it is not mixed with spending money, and only use it for real emergencies. Without it, the next surprise goes on a credit card.

Step 6: pay off debt in a set order

Once the emergency fund has a start, use part of the 20% to pay more than the minimum on your debts. Paying the most expensive debt first saves the most interest; paying the smallest first gives quick wins. Debt snowball vs avalanche compares the two with your own numbers.

Step 7: check it at the end of the month

A budget only works if you compare it with what you actually spent. At month end, put the real figures next to the plan. Where you overspent, decide whether the plan was unrealistic or the spending was. Adjust, and try again next month. Most budgets take two or three months to settle.

General information to help you plan, not financial advice.