Principles Of Budgeting for Families Considering Having Kids

by | Dec 22, 2023 | NDA Blog, Personal Finance

Budgeting may be challenging, but the principles of budgeting come in especially handy for those considering becoming parents. The cost of raising a child in South Africa has become a considerable financial responsibility, with the expenses covering a range of needs from basic care to education.

For families contemplating the addition of another child, it is more important than ever to understand and master budgeting. The principles of budgeting are not just about tracking expenses; it’s about making informed decisions that ensure the financial stability and well-being of the family.

In this blog, we define the term budget and explore the budgeting process in the context of the rising costs of child-rearing in South Africa. Whether you’re a new parent or considering expanding your family, budget prioritization is essential in preparing for the financial implications of welcoming another baby into your life.

The Principles of Budgeting - Unveiling The Real Cost Of Raising Kids In SA

The Principles of Budgeting: Unveiling The Real Cost Of Raising Kids In SA

South Africa’s economic climate, influenced by inflation, significantly impacts the costs associated with raising a child. The average yearly expense for a child is roughly R90,000, which can escalate to more than R20 million by the time they reach adulthood, not considering inflation’s effect. The cost fluctuates based on the child’s age: there’s an initial increase during the first 18 months, a gradual rise starting at age four, and a notable jump in teenage and early adult years, partly due to high youth unemployment.

A substantial part of these expenses is education. For instance, a three-year university degree currently costs around R350,000, but for today’s six-year-olds, this figure is projected to reach R1 million by the time they’re university-aged.

With such steep expenses, the principles of budgeting become essential, not optional. Many parents might not be fully aware of all the costs involved in a child’s upbringing. A good budgeting strategy, which includes categorising and routinely monitoring expenses, can significantly enhance financial control. Next, we’ll explore strategies for effectively applying the principles of budgeting and how to draw up a budget.

How To Budget - 6 Top Tips

How To Budget: 6 Top Tips

Before we get into how to draw up a budget, let’s first unpack the budget definition. Budgeting is like the GPS for your finances, helping you navigate and plan your money effectively. It’s all about creating a detailed household budget that maps out your expected income, fixed expenditure, and where your money is going over a specific period. When considering the costs of raising children in South Africa, the principles of budgeting become a vital tool for effectively managing your money. Here are six budgeting tips to help you out:

1. Net Income Calculation

Begin by determining your net income, which is the amount you earn after taxes. For employees, this appears on your payslip. Remember to include deductions like health insurance or retirement contributions. Self-employed individuals should calculate their net income by subtracting taxes, which can be estimated using tools like the Tax calculator. Incorporating the principles of budgeting involves a comprehensive understanding of your financial inflows and outflows.

2. Monthly Expense Listing

Your monthly expenses might include housing, loan payments, insurance, utilities, childcare, groceries, transportation, and other personal expenses. Remember to set aside money for savings, which could be for your retirement or as an emergency fund. Managing these expenses well is crucial for maintaining financial stability.

3. Applying Principles of Budgeting to Categorise Your Expenses

For better financial management, split your expenses into two types: ‘fixed’ (steady expenses like rent and medical aid) and ‘variable’ (changeable costs such as eating out and clothing expenses). Fixed expenses are regular monthly charges, whereas variable expenses vary and often present chances to reduce spending. This approach to applying the principles of budgeting clarifies your spending habits and highlights areas where you can save money.

4. Average Monthly Cost Estimation

To determine the average monthly cost in each expense category, first organise your expenses into categories. Then, examine your spending over several months. Use the consistent amount for fixed expenses, such as rent. For fluctuating expenses, like groceries, add up your total spending in that category across the months and divide by the number of months. This method incorporates the principles of budgeting and offers a clearer picture of your average spending by smoothing out variations.

5. Making Adjustments

When your expenses surpass your income, cut back on flexible costs such as entertainment and shopping. If you have extra money, boost your savings, for instance, by adding more to your retirement fund. It’s also important to enjoy life, so feel free to indulge in a treat or experience occasionally, provided it fits within your financial plan. You can also make use of our National Debt Advisors budget planner to get a streamlined budget that applies the main principles of budgeting tailored to your specific needs.

6. Principles of Budgeting Deep Dive With Effective Budget Maintenance

Make it a habit to review your financial budget often, ideally each month or when your financial situation changes significantly. This helps you adapt to changes in your income, expenses, or financial goals. Regular updates are one of the main facets of the principles of finance as they ensure your budget management accurately represents your current finances, helping you make smart choices about saving, investing, and spending. Keeping on top of these changes is key to managing your money well and securing your financial future.

How To Budget Money On Low Income

How To Budget Money On Low Income?

Struggling with a tight budget? You’re not alone. Many grapple with making ends meet, especially on a lower income. The situation is often exacerbated by the additional financial burden of raising children in South Africa. The good news? There’s hope and strategy to gain control of your finances. Here’s a tailored guide to help you navigate through your financial journey, an essential practice if you’re contemplating having another child.

Step 1. Principles of Budgeting: Start With The Basics

Start by accurately assessing your income and expenses, prioritising necessities like food, housing, and transportation, followed by other costs such as childcare and debts. If expenses exceed income, reduce non-essential spending, prefer home-cooked meals over eating out, buy clothes only when necessary, and sell unused items for extra cash. Use these principles of budgeting to give yourself a head start when trying out budget examples with a low income.

Step 2. Unlocking Savings: Everyday Essentials and the Principles of Budgeting

There are several strategies to economise on necessary expenses. For food, planning your meals, opting for store brands, and taking advantage of discounts can lead to significant savings. Reducing energy consumption can lower your electricity bills. Combining errands or finding alternative, more cost-effective modes of travel can save on transportation costs. Lastly, regularly comparing insurance rates can help you find more affordable options.

Step 3. Boosting Income and Establishing an Emergency Fund

To improve your financial stability, think about increasing your income through part-time jobs, extra hours at work, or freelance gigs. Continuously seeking better employment opportunities or requesting a salary increase is a fundamental aspect of the principles of budgeting. Additionally, it’s wise to create an emergency fund, starting with a goal of around R1,000. Having this reserve can be crucial in covering unforeseen costs and can help you avoid getting into debt.

Step 4. Principles of Budgeting in Debt Management and Budget Updates

It’s important to avoid accruing new debts and prioritise paying off existing ones, as this approach will progressively liberate more of your income. Additionally, ensure your monthly budget is regularly updated to reflect changes in your financial circumstances. Maintain its flexibility, adapting it to suit your current financial situation for optimal management.

Secure Your Family’s Future with National Debt Advisors

At National Debt Advisors, we understand that each family’s financial journey is distinct, especially when managing debt while striving to implement basic financial principles in order to provide the best for their children. Navigating these challenges requires not just commitment but also expert guidance. This is where National Debt Advisors step in to offer invaluable assistance.

Whether you’re grappling with existing debts or preparing for the added expenses of a growing family, our team at National Debt Advisors is here to help you devise a robust financial plan. Remember, adding a new family member comes with additional financial responsibilities. It’s crucial to have a sound financial plan in place.

National Debt Advisors is your reliable partner in this journey, dedicated to helping you achieve financial stability and peace of mind. In order to get a glimpse of how we can help you implement the basic principles of budgeting, you can use our debt counselling calculator to get an idea of how we can help you budget. Contact us today.

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