How to build a monthly budget that works in South Africa

What is a zero-based budget?

A zero-based budget is a plan in which your income for the month minus everything you have planned to spend or save comes to exactly zero. Zero does not mean you spend everything. Savings and debt payments are lines in the plan like any other, so every rand has a purpose before the month begins.

The method suits South African households well because so much of the month's money is already spoken for: rent or bond, transport, food, electricity, school costs, insurance and debt. Writing it down shows what is left and stops that money from disappearing on small purchases.

The National Credit Regulator gives similar advice to borrowers: work out how much income your family earns and what your total expenses are each month, plan for unexpected costs, and keep receipts of your payments.

How do you build a budget in six steps?

Set aside an hour with your last two or three bank statements, your payslip or income records and any unpaid bills. Work with real numbers from the past, not guesses, because most people underestimate what small purchases add up to.

• Step 1: Write down your take-home income for the month, meaning what actually lands in your account after tax and deductions. Include regular extras such as a grant, maintenance or side income, but leave out money you are not sure will arrive.
• Step 2: List your fixed essentials, which are the same each month: rent or bond, school fees, insurance, medical aid, funeral cover and loan or account instalments.
• Step 3: List your variable essentials, which change: groceries, electricity, transport, airtime and data, toiletries and medicine.
• Step 4: Add savings and debt repayments as lines in the plan. Pay the minimum on every debt, and put a small amount aside for emergencies and annual costs.
• Step 5: Assign the remaining rands to everything else, such as clothes, family support, eating out and entertainment.
• Step 6: Add it up. If the total is above your income, trim the flexible lines until income minus plan equals zero. If it is below, give the leftover rands a job.

What does a sample monthly budget look like?

The table below is an example only. The numbers are invented round figures for a household with a take-home income of R15,000. They are not a recommendation, an average or a target. Your rent may be double this, or you may have no school costs.

Notice how the plan ends at exactly R0 unassigned. Notice, too, that the household in the example puts a modest amount into savings and debt repayments before it spends on anything flexible.

Is the 50/30/20 rule useful in South Africa?

The 50/30/20 rule suggests spending about 50% of take-home income on needs, 30% on wants and 20% on savings and debt repayment. It is a handy starting point, but it is a heuristic, not a rule of law, and it was not designed around South African housing, transport and electricity costs.

In the example above, needs such as rent, transport, food, electricity, airtime, school costs and insurance take more than 80% of income. Debt and savings take about 12%. That household is not doing anything wrong; it is simply working with a lower income relative to its essentials, which is common. For many households, the honest goal is to move a little at a time, for example from saving 3% to 5%.

Use the rule to test your plan, not to judge yourself. If your needs are far above 50%, look first at the biggest lines, usually housing and transport, before cutting small ones.

How do you budget for electricity, load shedding, airtime and transport?

Plan electricity as a variable essential and plan for the whole cost of staying powered, not just the units. If you use prepaid electricity, decide how much you will buy each week and put it in the budget as a weekly amount. Winter months usually cost more because of heating, so build in a higher figure for those months, using your own past purchases as a guide.

Load shedding adds costs that do not appear on an electricity slip: gas for cooking, candles or rechargeable lights, power banks, and extra data when you work or study from home on mobile networks. Add a small 'power backup' line instead of paying for these from the grocery money.

For airtime and data, check how much you really use over a month and pick the bundle that matches. For transport, record your taxi, bus, fuel or e-hailing spend for a month. Transport and electricity are two lines that can swing, so keep a small buffer in the plan.

How do you plan for January, December and other yearly costs?

Yearly costs feel like emergencies, but they are predictable. January brings school fees, uniforms and stationery. December brings travel, family gatherings and festive spending. Other costs come once a year too: vehicle licence renewals, annual insurance premiums, winter blankets and heaters, and birthdays.

List each yearly cost, estimate it, divide by 12 and set that amount aside every month in a separate savings account. This is sometimes called a sinking fund. When January arrives, the money is waiting and you do not need to borrow.

If you have not started yet, begin with the cost that is nearest. Even a part-payment helps. The NCR notes that people often need to borrow after the festive season because of the pressure on finances, which is one more reason to plan ahead.

• January: school fees, uniforms, stationery, transport changes.
• Mid-year: winter heating, blankets, vehicle licence or insurance renewals.
• December: travel, groceries for gatherings, gifts, and the cost of supporting family.

How do you budget when your income changes every month?

If you earn commission, run a small business or rely on piecework, base your plan on a low month, not your best one. Look at the last six to twelve months and pick a figure you are confident of reaching. Budget with that number, and count anything above it as a bonus for savings, debt or your annual costs.

Pay yourself a steady 'salary' from a separate account. When money comes in, put it in the holding account and transfer the same amount to your spending account on the same date each month. That smooths out the highs and lows, and a buffer of one month's essentials makes it easier.

Put the essentials in order of importance, so if money is short you know what to pay first: shelter, food, power, transport to work and the debts that carry the heaviest consequences.

What are the best ways to track your spending?

The best tool is the one you will use. A paper notebook, a simple spreadsheet and the spending categories in many bank apps all work. What matters is that you look at it regularly, ideally for ten minutes each week.

Keep your receipts or take a photo of them, record cash spending the same day, and compare what you spent with what you planned. At month-end, note which lines were over and which were under, and adjust next month's plan. A budget is a living document; your first one will be wrong, and that is normal.

• Spreadsheet: free, flexible and easy to adjust, with a column for planned and a column for actual.
• Bank app: automatically sorts card spending into categories, though cash spending needs to be added by hand.
• Notebook or envelopes: simple and visual, and useful for cash spending such as taxis and groceries.
• Weekly check-in: choose a regular day to update the numbers and see how the month is going.

How does a budget help before you borrow?

A budget shows what you can afford to repay each month without cutting essentials. If the plan has no room for another instalment, a new loan will push you into a shortfall. If it does, you can work out what instalment is realistic before you speak to any lender.

Our guide on how much you can afford to borrow walks through that calculation, and the affordability calculator on our Loans page lets you test the numbers. If your budget will not balance, talk to your lender early or see our guide on what to do when you cannot repay a loan. A registered debt counsellor can also help, and our guide on debt consolidation and debt review explains how that works.