20 Jul

20 July 2022

Having a reasonable budget is one way to stop living paycheck-to-paycheck and feel secure with your finances. Living expenses are an inevitable part of adulthood but knowing how much basic expenses cost will ensure you are prepared to tackle them.

You will also want to prepare for the unexpected. For example, your income might be lower than you expect, while some of your expenses may be higher than anticipated, hence you might run into financial trouble or debt if you do not have a solid budget in place.

With a solid budget, you will have enough money for living expenses, unexpected emergencies and leisure. In this blog, UASA looks at a living expenses budget, how much of your income should you be spending on your living expenses, how can you make more money to afford these expenses, and more?

What is a living expenses budget?

A living expenses budget is a budget based on your day-to-day expenses and income. Your living expenses are necessary for your daily life and basic living, such as rent and groceries.

Having a living expenses budget ensures that you can address your major expenses based on how much you make and your cost of living. It can also help you make a plan if you are currently spending more than you are making and need to reduce your spending so that you do not end up in debt.

Living expenses are expenditures necessary for basic daily living and maintaining good health. They include the main categories of housing, food, clothing, healthcare, and transportation. Understanding what is involved in each area will help you budget for them.

While there are likely other recurring costs in life, they might not be considered living expenses. These expenses are called flexible costs, and they include things like recreational activities and entertainment. Your gym membership, DSTV, or Netflix subscription should be accounted for elsewhere. You will also want to ensure your budget includes any debt repayment, such as a short-term or student loan.

There is a lot to include in your budget, but it is essential to take the time to break down all your expenses to figure out where you can cut back. In general, experts recommend using the 50/20/30 rule to create your budget. The 50/20/30 guideline offers a basic financial strategy for your spending and saving. The rule says that you should spend 50% of your income on living expenses, like rent and car payments. You should put 20% of your income in savings, whether for a rainy day fund or a down payment on a house. For the remaining 30%, put it toward personal expenses like a night out with friends or a weekend getaway.

Because the 50/20/30 rule is a guideline, there is some flexibility. You can adjust the percentages based on your unique circumstances. The main idea is to limit your living expenses to roughly 50% of your income. You will have enough left for your savings and fun expenditures.

Cutting Expenses:

  • Consider having a roommate to split costs if living on your own is too expensive.
  • Estimate your rent or bond payment budget to determine how much you can realistically afford to spend on rent each month.
  • Food and grocery
  • Scale back on eating out and plan your meals at home.
  • Shop around for a better car insurance rate.
  • Downgrade your cell phone service plan.

Some living expenses, such as your monthly rent, are fixed and will not often change. Other costs are adjustable, such as food and clothing. That means your spending and savings might differ from month to month, which is okay. While, consistent saving is significant. You will be ready just in case a necessary expense comes up. To ensure your plan works, revisit your budget monthly and make any necessary adjustments.

Figuring out your living expenses is a critical element of financial planning. You can create a more accurate budget with a solid understanding of your recurring costs. You can ensure you have enough to cover both the expected and unexpected. You will also benefit from more financial security and peace of mind.

Ref: www.mint.intuit.com                                                                           www.uasa.org.za



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