We recently assisted a lady who needed help with her personal budget, says Pieter Willem Moolman.

She had applied for finance for a new car and was completely stumped when the bank asked for proof of her income and expenses. Like many of us, she had no idea where to start.

I think it is safe to say that every person needs a budget, whether it is the beggar at the traffic light who knows he needs to collect R5 before lunchtime to feed himself or the business executive who has it all on a spread sheet and ticks it off as things get paid.

Some may have their budgets in their heads while others will have it written down. I prefer the latter, because the sense of commitment and control is far greater when you can actually see how much you’re spending and what you’re spending it on.

In order to start building wealth, you need to save and invest some of your money. There are different ways to save, but the bottom line is that you need to know how much you can save.

The way to find out is to draw up a personal budget. List your expenses in order of priority and make sure that saving is not last.

Saving from surplus funds is the wrong approach as it means that saving is indeed at the bottom of your list!

Begin with your income and see how reliable it is and how you can maximise it. If you work for a fixed salary, make sure that the deductions are realistic and necessary.

A deduction for a pension or provident fund may be good while a deduction for the office social club may be a waste.

Then write down a list of your expenses by starting with those that you cannot avoid like rent or bond repayments and food.

Next pen down the expenses that secure your income, for instance your car payment and petrol if your have to call on clients. If you do not use your cellphone to generate income, that expense should be very low on the list.

The next step is to evaluate and cover your risks. For example, should you be in a major car accident and end up in hospital as a result, there will be medical expenses and the possibility of being without a car to do your work.

Your financial planner will be able to assist you in evaluating these risks and recommending suitable cover.

Your broker will also be able to help you with a savings plan – whether it is an annuity to supplement your pension or a shorter term plan for the house or other investment.

Once the above is in place, you can add luxury items such as holidays, a new car and entertainment.

Test your budget at the end of the month by writing in the actual expense next to the amount budgeted to see where you have overspent and make adjustments.

This way you will be able to keep track of your income and expenditure and make sure that you focus on the important things that will grow your wealth.

Pieter Willem Moolman is the owner of PWM Financial Management in Port Elizabeth. Visit www.pwmfb.co.za or phone 041 582 3034.