Steps to smarter budgeting

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"Whether you are trying to get out of debt, save some money or simply stay in the green, a basic budget is one of the most underrated tools for gaining control of your finances, managing expenditure, saving and avoiding debt," says Graham Craggs, spokesperson for Budget Insurance.

Principles of smart budgeting

Budget Insurance offers the following advice for drawing up your 2016 budget:

• The first step is to draw up a list of your fixed expenditures and other monthly deductions and tally these up against your income. If your expenses are more than your income, then you need to begin planning how you are going to reduce them. If you do have some money left over every month but believe you should be saving more, draw up a budget to stick to and gain control of your expenditure.

• Some areas are easier to trim down on so concentrate on them first. Remember, even the smallest adjustments can make a meaningful difference over the long term.

• Once you have trimmed-down your expenses, you can start channelling the extra money you have into paying off your debt faster, starting with those with the highest interest rates first.

• Make sure your budget has a goal, whether it's to pay off your credit card debt or save money for a family holiday. Working towards a goal provides direction, makes it more fun and, delivers a sense of accomplishment when the goal is finally achieved.

• Be realistic. If you set too lofty a goal and reaching it means deprivation on all fronts, the likelihood of you sticking to your budget is minimal.

• Be honest about your debt obligations and your expenses so that you have a clear and realistic picture of your financial situation. Communicate this with everyone in the family so that they understand the limitations within which they must live. This will also prevent any feelings of resentment when they are refused money for something they want to do or buy.

• Deliver on your promises and offer rewards. If the goal was to save enough money to go on a holiday, then you must deliver on your promise when that goal is reached.

• Various apps are available to help you to easily track your income and expenses. Some of our free favorites available on both Android and iOS include: Wallet, Wally, Level Money, Spendee and Mint. Make use of these to have an up to date report of your financial health.

Cutting fat off your budget

Craggs lists the following as just some of the possible areas where you can start cutting excess fat from your budget:

• Cellphone: If you know that you can and should be spending less on your cellphone bill, then consider switching service providers or swap to a package that is more appropriate to your usage requirements.

• Entertainment: If you are the type of person who enjoys regular nights on the town, consider cutting down the amount of times per week you go out by half or set yourself a limit in terms of what you can actually afford to spend on entertainment and once that is gone, stay at home.

• Dining out: If it is your custom to buy lunch at the corner deli or office canteen every day, think about rather packing a lunch to take to work.

• Groceries: If you are in the habit of popping into a convenience store on your way home from work to buy bits and pieces for dinner, it is costing you more than if you made a proper shopping list and shopped wisely at a supermarket once or twice a month.

• Bond: Interest rates are on the rise and if your bond instalment has become unmanageable as a result, shop around and see if you can lower your monthly repayments by refinancing your home at a more favourable interest rate.

• Credit cards: Abusing the credit facility on your credit card is dangerous because it can land you in serious debt. It is also more expensive in the long run because interest charges are usually high. Keep your credit card for emergencies only and make the decision to pay for goods and services with cash or debit card only.

• Insurance: By shopping around for the best insurance premium you may be surprised about how much you can save.

"Remember that even the smallest adjustments in a number of areas of your budget can add up to significant savings. The small changes and sacrifices you make now will be worth it in the long-run," says Craggs.