If you are struggling to break even every month, this is an easy way to see where you are overspending. If you are spending more than the recommended amount on any of these categories, that is where you need to cut back:
- 35% on household expenditure: this includes spending on domestic wages, food, communications, entertainment, security, travelling costs, water and electricity.
- 25% on financial services: this is how much you should be spending on long-term life assurance products, short-term insurance, medical aid, pension contributions and towards longer-term savings.
- 35% on debt repayments: this includes your mortgage (or rental), car repayments, credit cards and store cards. When taking out a mortgage, make sure your repayments are not more than 23% of your income.
- 5% on emergencies: this is money allocated specifically for emergencies and not long-term savings.
What most people will find is that debt is the biggest culprit. Paul Slot, director of personal finance well-being and debt-counselling specialists Octogen, says most households spend around 47% on debt repayments. The 12% difference between what one should spend on debt and what households actually are spending, comes from the savings category. On average households only invest about 15% into financial services.