In both the personal and business setting budgeting is an essential task. While most of us have some knowledge and experience with tracking our spending in the domestic sphere, many small businesses aren’t familiar with the differences. Both personal and business budgets share some similar characteristics and both boil down to projecting, tracking and managing of income and expenses.  

Personal budgeting involves financial decisions and activities of an individual and or a household.

Business budgeting involves the managing of assets, liabilities, revenue and debts of a business. Accurate business budgets are essential as they help us ensure that our business has enough revenue to remain viable while also giving us an in-depth window into how the business is performing.

A budget is a plan for how you are going to spend and save your money. If you live in a household with shared expenses then it may be helpful to have a family budget. This will show the income and expenses for everyone in the family and will help plan for the month ahead. If everyone involved is aware of the budget then the chances of sticking to it are much higher.

One way would be to find alternative sources of income, perhaps you already have a skill, or you can learn a skill that can help you earn some additional income. Another way would be to look at expenses and see where you can reduce spending. We usually say look at variable or changing costs such as airtime, transport, data, extra murals etc. if you are still short after reducing variable costs, you may need to look at reducing even on fixed costs. If you can downgrade on some of the fixed costs for example by looking to rent in a more affordable area, or by changing your car to a more affordable one, you may also do that. 

Building emergency savings is key. Experts usually say put away money that can cover your expenses for up to three months. Be disciplined and put away some money from your budget on a monthly basis. If you had an emergency fund but used it during the lockdown, you should start rebuilding it as soon as possible. Find an alternate side hustle if need be and try to diversify your revenue through other opportunities. It’s been a difficult few months with Covid-19 and we have all been affected in some way or another. Some of the other adjustments we can make are cutting down on expenses to cope with a reduced income. Where we took payment breaks, we need to get back into making repayments. This is a time to be disciplined and put aside some money each month for any further emergencies. If you need to adjust your insurance premiums, speak to your insurance company and see what help you can get.

Communicating about money is never easy. As individuals we see and think about this differently and we express and connect with others in different ways. Using an assertive method of communication about money enables you to take responsibility for what you are thinking, feeling and needing in an open, honest, direct and concise way. It is respectful of yourself and others and provides an equal opportunity to negotiate. It also allows for all parties to have a voice, be heard and enables constructive resolution of any misunderstanding and conflict.

Each time you receive money for the business, note that it’s not yours, it belongs to the business. Business income can be from sales, clients paying for services, equity from people buying shares in your business, business loans and grants.

Therefore, you should always pay yourself a salary from the business for your personal and household expenditure. Open up separate bank accounts and keep your documents and receipts etc. separately. Prepare separate budgets for both personal and the business and keep track of any shared expenses. And ensure to refund yourself or the business if you’ve used money either way.

Here we encourage that one should start with an amount that is affordable and most suitable to you and build the discipline from there. Ideally one should be saving in different products for short-, medium- and long-term goals such as retirement and future business opportunities. Some of the savings if employed, can be deducted from your salary, and some savings you can arrange directly to be debited from your personal or business bank account depending on the purpose of your savings. Arranging a debit or stop orders help with the discipline in maintaining regular savings. 

Choosing the right savings product is important and depends on your personal circumstances. We recommend that you speak to a registered financial adviser or a financial planner to help you make these decisions for both personal and business savings.

You can find a certified financial planner here.

When it comes to investing, things can become a bit overwhelming as there are many different options available. The main asset classes are shares, bonds, property, and cash (referring to high interest bank accounts such as money market and fixed deposits). We recommend you speak to a registered financial adviser who will be able to assess your unique situation and help guide you to the right products for you.

You can find a registered financial planner here.

You can invest in property by buying a physical buy-to-let property where you become a landlord and find tenants. You can also invest in property by putting some money in a property fund or Real Estate Investment Trust. These funds invest in different kinds of properties including commercial (office blocks), industrial and retail (shopping centres).

A balloon payment (also known as residual payment) is a lump sum payment which is attached to a loan, such as for a car. This is often quite high (as much as 30% of the value of the item) and is due in addition to the last month’s payment.

Balloon payments may seem attractive in that they allow borrowers to lower their monthly loan repayment costs in the initial stages of paying back a loan. However, they can be risky as there is a large payment due at the end of the loan period and if you are not able to settle this amount, you may need to refinance the lump sum.

Buying things on credit may seem great because you are able to get the item now and pay for it later. But, you must always be careful when taking credit as this means that you will be paying back more money than you loaned due to interest. Only take “good” credit which is for things that will gain value and add to your wealth, such as education and property. Avoid “bad” credit which is for things that will lose value such as clothes.

Debt counselling is helpful because there is only one monthly repayment to be made. When you are under debt counselling, creditors may not take more action against you, you will no longer get calls demanding payment, and there is no permanent record of having undergone debt counselling. Another benefit is that the debt counsellor will suggest ways of cutting costs and saving money while also making sure that your budget meets your basic needs (e.g. housing, transport, food). This means you will never pay more money than you can reasonably afford.

The disadvantages of debt counselling is that you’re not allowed to take more credit during this process, it does cost a little bit of money as you need to pay the debt counsellor (these fees are regulated and set by law), and your debts will take longer to pay off as a result of paying smaller amounts each month.

You can find a registered debt counsellor on the National Credit Regulator site at https://www.ncr.org.za.

A debt consolidation company will repay all the businesses to whom you owe money, and you will then have to repay this one company.  Be aware that sometimes the interest rate for this service is often higher, meaning you will have to repay more. 

When you complete a credit application form, you agree to abide by the terms and conditions stipulated by the credit grantor, which is that you will pay the agreed amount in full and on time. If you have lost your job or are no longer able to make these repayments, it is important that you inform the credit grantor of the situation and try to come to an agreement on the payment. All agreements must be put in writing.

The credit grantor is not obliged to change the terms of the original agreement, but they may do so to recover the full outstanding debt.

A credit profile is information about your credit history that is kept by the Credit Bureaus. This report contains information such as your name, address, employer and ID number, which are the details you provide when completing a credit application form. They also keep details of your credit history such as the account history and payment behaviour i.e. do you pay your instalments regularly in full and on time.

A garnishee order, now called an Emolument Attachment Order (EAO), is an order issued via the courts by a creditor on an indebted worker’s employer. It forces the employer to deduct money from the worker’s salary or wages to pay for the debt. Law (effective July 2017) states that no more than 25% of a worker’s salary or wages can be deducted.

A short-term insurance policy is a way of reducing the cost of risks to your property or possessions (accidents, losses of property, theft, fire). You pay a monthly fee and if you lose something through an accident or another event, you may claim from your insurance company. 

Long-term insurance covers life-changing events to help provide you with an income in the longer term. This insurance usually covers people. For example, you may take out a funeral policy to cover the costs of the funeral if there is a death in the family, or a life policy to help provide for the policy holder’s remaining family members when he/she dies. 

Waiting periods, also known as qualifying periods, are the time (e.g. three months) before insurance coverage kicks in. You may not receive benefits for claims made during the waiting period. Waiting periods are often used by companies that experience high turnover rates because they stop people from taking out insurance, claiming immediately, and then cancelling their policy.

When you claim from an insurance company, there is often an amount that has to be paid towards the replacement of the item you are claiming for. This amount is the excess. This excess amount is shown in your policy documents.

A funeral policy is often held by an individual while a burial society is a collective savings scheme by friends, family, and colleagues.

Money is a significant source of stress and, in turn, can take a toll on your mental health. When you feel a mixture of negative emotions – be it stress, anxiety, depression, guilt, or hopelessness – this can actually worsen your financial state. BUT, no matter what your financial situation, there are ways to reduce your money stress and improve your mental health. Having financial literacy helps us understand certain basics that can help us feel more in control.