Tristan Naidoo, Legal Advisor at Old Mutual has formulated tips on how to balance your budget. Photo: File

DURBAN – For many South Africans, a regular monthly cycle starts with having their salary deposited in your bank account followed by the first few days of splurging and then anxiety of trying to cover monthly expenses with the leftover money.

Tristan Naidoo, Legal Advisor at Old Mutual said "Budgeting doesn’t have to be difficult. In fact, no matter your level of financial literacy, income or education anyone can start using and benefiting from budgeting".

He added that regular budgeting empowers people because it gives people control over their spending behaviour.  

In addition, it helps people to identify any corrective action that would need to be taken in order to focus the expenditure towards the things that are important to their family. 

No matter your how much you earn or how many expenses you have, the ABCs of a budget is simple. Naidoo breaks down the science.

A - Income
This is the most simple way to determine and record because it’s generally in the form of a monthly salary. Always use the net salary paid into your bank account – not your gross salary.

B - Expenses
Regular fixed expenses are bonds, rent or vehicle repayments, investments. Irregular expenses include groceries, fuel and store repayments. When doing your budget plan, take a look at your bank statement over the past few months and record the regular expenses that you have to cover. Also, work out an average of irregular expenses so that you can make plans for it. 

C - Evaluation or Moment of Truth
This is by far the most important part of the budget. Once you’ve subtracted your expenses from your income you’ll have your Moment of Truth – an indication of your monthly financial position once you’ve allocated money to cover all your wants and needs.

"The Moment of Truth is important because it lets us know whether corrective action is required in our spending habits. A negative moment of truth means you’ll have to take a sober look at your expenses and see where you can trim the fat so that you will be able to make ends meet going forward," said Naidoo.

If you have a good grip on your finances and you are indeed in a positive position with surplus funds. Naidoo said it is crucial to ensure you’re covered when it comes to your financial needs like retirement savings, severe illness and disability cover as well as the right savings and investments to make your financial dreams a reality.