Following a year of pandemic and lockdowns, South African employees and companies are looking ahead to the annual Budget Speech on 24 February with a sense of foreboding.

In the wake of the crisis, many jobs have disappeared, countless businesses have shut down, and billions of rand in tax revenue from sources such as VAT, PAYE, and excise duties have been lost.

With near-record levels of unemployment, and limited fiscal room, the Finance Minister faces a difficult task in balancing the need to raise more tax revenue against the reality that most businesses and consumers don’t have more to give.

In reality we all face the same balancing challenge, can our income triumph over our expenses? Thus the need to understand the concept of budgeting!

What is a Budget?

A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis. Budgets can be made for a person, a group of people, a business, a government, or just about anything else that makes and spends money.

Keeping track of how much you earn and spend doesn’t have to be drudgery, doesn’t require you to be good at math, and doesn’t mean you can’t buy the things you want. It just means that you’ll know where your money goes, you’ll have greater control over your finances.

Personal budgets are extremely useful in managing an individual’s or family’s finances over both the short and long term horizon.

Budgeting is creating a plan to spend your money.  Good budgeting is spending less than you are earning as you plan for your financial goals.  Budgeting is the fundamental step in achieving financial literacy, and by extension, reaching financial security and freedom.  Budgeting is the process of creating a plan to spend and invest your hard earned money wisely to meet your personal and financial goals in life.  It should not be a mathematical exercise that we think we have to endure; rather, it is the result of self-assessment of our relationship with money and a necessary road map to steer us toward a higher standard and quality of living.

Creating and using a budget is not just for those who need to closely monitor their cash flows from month to month because “money is tight.” Almost everyone—even people with large pay-checks and plenty of money in the bank—can benefit from budgeting.

Budgeting is simply balancing your expenses with your income. If they don’t balance and you spend more than you make, you will have a problem. Many people don’t realize that they spend more than they earn and slowly sink deeper into debt every year.