One of my first bosses referred to their youngest staff members as “Weekend Millionaires” because they were “living their best lives” for the first weekend after payday and but were ultimately broke for the rest of the month. If you observe those around you, you will notice that most middle-class people plan for the weekend, while wealthy people plan for generations. This is a prime example of poor or ineffective financial planning.
In a country where economic uncertainty and the rising cost of living are daily realities, building wealth may seem like an unattainable dream for many South Africans. However, the key to financial success is not winning the lottery or stumbling upon a get-rich-quick scheme—it starts with a strong financial foundation. By mastering the fundamentals of budgeting, saving, and setting realistic financial goals, you can take control of your financial future.
In the upcoming weeks and months, we will focus our series on the four main components of financial literacy: Budgeting, Saving, Investing, and Debt Management. For this month’s column, we will focus on Budgeting.
Firstly, let’s see how observant you are. Have a look at the diagram below and see if you can spot the differences between the Middle-Class Person and the Wealthy Person?
ANSWER: The average middle-class person has no assets. They rely on a job that pays them a salary, which is then used to cover expenses and liabilities. If the average middle class person were to be retrenched, very few of them would be in the financial standing to be able to survive indefinitely, and this is where budgeting comes in.
The Importance of Saving: Preparing for the Unexpected
One of the most critical aspects of financial stability is having an emergency fund. According to Old Mutual Savings and Investment Monitor 2019, a whopping 78% of South African households have no emergency savings. Life is unpredictable—whether it’s an unexpected medical expense, job loss, or car repair, an emergency fund acts as a financial buffer to keep you afloat without resorting to debt.
A good starting point is to save at least three to six months’ worth of essential expenses. While this might sound daunting, starting small can make a big difference. Setting aside even R500 to R1,000 per month can help build a safety net over time.
To make saving effortless, consider opening a high-interest savings account or a tax-free savings account (TFSA) at your bank. Automating your savings through a monthly debit order can also help ensure consistency, treating your savings like a non-negotiable expense.
The Power of Budgeting: Knowing Where Your Money Goes
Too often, people hear the word ‘budget’ and immediately think of limitations. But as I always remind my clients: “A budget is simply a plan for your spending – not a restriction.” Understanding where your money is going is the first step toward taking control of your financial future. In this month’s column, we discuss Zero-based Budgeting, Unconscious Spending, and The 50/30/20 Rule, three essential tools that can help you gain clarity over your finances. A well-structured budget ensures that your income is allocated efficiently, preventing overspending and unnecessary debt.
Zero-based Budgeting offers a structured method where every rand is assigned a job—whether it’s for needs, wants, savings, or investments. Your total income minus your total expenses equals zero. Implementing this technique ensures that every rand you earn has a purpose, allowing you to balance necessary expenses with lifestyle choices while still prioritizing savings. This technique works well for students and those new to the workforce, as there is no discipline required – you can’t spend what you don’t have access to, so this is ideal if you are prone to impulse spending.
Unconscious Spending is the unaccounted for ad hoc expenses we all seem to do without thinking – the money that quietly leaves our bank accounts without us even realizing it… It’s the R50 takeaway coffee here, the R250 subscription service there, or the impulse buys at the checkout which all eventually add up. When critically assessed, most of my clients have found a minimum of R1000 of unaccounted for expenses – money that could be invested, saved, or allocated elsewhere.
The 50/30/20 Rule:
This simple framework and one of the most effective budgeting strategies is the 50/30/20 rule, which breaks down your income as follows:
• 50% for Needs: Essentials such as rent or bond payments, groceries, utilities, transport, and medical aid should make up no more than half of your income.
• 30% for Wants: Entertainment, dining out, gym memberships, and hobbies fall into this category. While enjoyable, these expenses should be controlled to ensure they don’t eat into savings.
• 20% for Savings and Debt Repayment: This portion should go toward building an emergency fund, contributing to investments, and paying off any outstanding debt.
IN PRACTICE: Monthly Budget Breakdown
Our hypothetical worker earns R20,000 a month. We’ve added necessities, wants, and savings and every cent is accounted for (Zero-based budgeting). By doing this before payday, they are less likely to spend money on unnecessary things and more likely to make it to the end of the month without financial stress. Let’s break down their financial plan into bite-sized chunks.
It is advised that you settle your savings (20%) and needs (50%) first, so that your necessities are covered and you have emergency cash flow should the need arise.
PLEASE NOTE: There is still an allocation for wants (30%)—so just because we are being financially responsible, doesn’t mean we need to sit high and dry.
Budgeting doesn’t have to be complicated. Here is a simple way to allocate funds and create either a daily or weekly spending plan.
BONUS: The Daily vs. Hourly Rate Spending Trick
I personally use the daily rate vs. hourly rate as a tool for discretionary spending:
• R20,000 / 20 working days = R1,000 per day
• R20,000 / 160 workable hours = R125 per hour
Before you splurge on wants, ask yourself: “Is this worth the number of hours I had to work for this?”
You’ll never look at alcohol, cigarettes, or SHEIN the same way again.
The First Step to Financial Freedom
Laying a strong financial foundation doesn’t require a drastic lifestyle change—it simply demands consistency, discipline, and a commitment to financial literacy. By following the 50/30/20 rule, prioritizing savings, and setting realistic financial goals, you can build a future where money is a tool that works for you, rather than a source of stress.
Start today. Review your income, adjust your budget, and take control of your financial journey—one step at a time.
*Disclaimer
This article is intended solely for informational purposes. The content provided does not constitute financial advice of any nature whatsoever and should not be relied upon as such. The decision to invest, and the suitability of any investment choice is solely your responsibility. While every effort has been made to ensure the accuracy of the information presented, it is recommended that you consult with a qualified financial advisor before making any financial decisions. The writer and the publisher assume no responsibility or liability for any errors, omissions, or actions taken based on the information provided in this piece.
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