By Tokiso TKay Nthebe
Managing money can sometimes feel restrictive and daunting, as if all the joy has been drained out of life. While it is essential to plan your spending and prioritise expenses, life should be about more than just paying bills.
This blog explores how to create a spending plan that not only supports your lifestyle but is also practical and easy to stick to.
“It is not about having lots of money. It is knowing how to manage it.” – Anonymous
What is a spending plan?
A spending plan, also known as a budget, is a tool that directs your money where it needs to go, prioritises your expenses, and tracks your spending. Think of it as a roadmap guiding you towards your financial goals, helping you navigate the bumps and storms along the way with confidence. The challenge for many lies in creating a plan that aligns with their lifestyle, leaving them feeling disempowered about managing their finances.
How to create a spending plan that fits your lifestyle?
Your money and the lifestyle you desire don’t have to be at odds. In fact, your money should support and enhance the quality of your life. To achieve this, consider these key steps:
- Understand your current financial situation
- Income
Be honest with yourself: Does your financial situation match the lifestyle you want?
Begin by identifying your income sources and calculate how much you need to sustain your desired lifestyle. Examples of income sources include salaries, commissions, interest, family allowances, and rental income. If your income falls short, think creatively about ways to boost it.
- Expenses
How much do you spend daily, weekly, or monthly? List all your expenses in order of priority. Examples include rent or mortgage payments, groceries, transportation, utilities, communication, personal care, and clothing. Assess whether these expenses align with your lifestyle and adjust where necessary.
2. Prepare a spending plan (Budget)
Once you understand your financial situation, it is time to draw up a realistic budget that matches your lifestyle. Here are two popular budgeting techniques to consider:
- The 50-30-20 Budgeting Technique
This method helps you maintain balance by allocating your income as follows:
– 50% for Needs: Essentials like groceries, rent, transport, and utilities.
– 30% for Wants: Lifestyle-related expenses such as dining out, travel, or new clothing.
– 20% for Savings and Investments: Building your financial future.
For example, if your net income is LSL3,000 per month:
– LSL1,500 goes to needs (e.g., groceries and rent).
– LSL900 is allocated to wants (e.g., leisure and travel).
– LSL600 is set aside for savings (e.g., LSL400 for savings and LSL200 for investments).
- The Envelope Budgeting System
Label envelopes with your expense categories (e.g., rent, groceries, savings). Using the same LSL3,000 as an example, physically allocate money into the respective envelopes and track your spending. This hands-on approach helps you stay disciplined.
3. Allow for flexibility and track spending
Life is unpredictable, and unexpected expenses can arise. Build flexibility into your plan by setting aside funds for emergencies. An emergency fund can act as your financial safety net. Additionally, regularly review and track your spending to ensure it aligns with your goals and lifestyle.
The key to a successful spending plan is to spend less than you earn, be honest about your habits, and remain adaptable. Most importantly, make the process enjoyable. Financial planning does not have to be boring—it is about creating a life you are excited to live.
Click below to download a spending plan template.
https://drive.google.com/file/d/1A0JyEvpaDhtW_Aprg76bGI8dHkSg0Aj8/view?usp=sharing
Take charge of your finances today. With a little effort and consistency, you can create a spending plan that supports your dreams and enhances your lifestyle.
Tokiso TKay Nthebe is an author, podcast host, financial coach and advisor at TKO Financial Wellness & Advisory who is passionate about financial wellness, education and financial planning.
For more visit www.tkofinancialwellness.com or email info@tkofinancialwellness.com
