How to budget to afford car insurance

Some motorists may tell you that they cannot afford car insurance. The question is whether they are following a budget or not. Let’s find out more about how to budget and some other useful tips.

What does a budget mean? 1

A budget is a specific plan you have for every Rand that you earn. This is not as difficult as it seems and will take a lot of stress out of your life.

The bottom line is that we need to understand the budgeting process, as described below.

What is your after-tax income? 1

When you subtract all your expenses and relevant taxes from the income that you earn, this will provide you with the amount that you can work with each month.

Select a budgeting plan 1

A budget needs to cover all of your needs, some of your nice-to-haves, savings for any crises that may happen, as well as savings for your future. According to nerdwallet.com, examples of budget plans are the envelope system and the zero-based budget.

Keep track of your spending 1

You can use an Excel spreadsheet to record all of your spending as the month goes by. This will show you how much is left and could indicate that you’ll have to put off buying something you wanted to until next month depending on the money you have left.

What about your accountability? 1

If you are experiencing problems taking accountability with your spending, nerdwallet.com recommends that you work together with an online team, like banking apps or other budgeting apps, that can assist you in making the correct decisions. In this way, you could learn to spend wisely.

Keep track of your budget 1

Your budget does change with time as your priorities shift, as well as expenditure and income. For these reasons, consider your budget plan to be dynamic, thus maintaining your budgeting momentum.

An example of a straightforward budget plan 1

Nerdwallet.com mentions that you should divide your income, after all the deductions have been made in terms of the applicable taxes and contributions, into needs or necessities, luxury items, and savings/debt repayments in the ratio of 50:30:20 respectively. There is power in simplicity, which is what makes this budget plan attractive.

What do your needs involve? 1

Your necessities could include bond repayments, lights and water accounts, groceries, transport, insurance, and any debt repayments.

What about luxury items? 1

It may be challenging to decide what should be considered a luxury and what is not. Perhaps asking the question “Do I really need this?” may clarify matters.

What a budget plan is not 1

Following a budget plan is not like waving a magic wand - the benefits may only be realized over the long term. Adhering to a budget plan could make your debt more manageable, allowing you to go out for dinner occasionally, and enabling you to save for those unexpected emergencies.

Disclaimer

This article can only be viewed as information because car insurance is complex. If you want to purchase a car insurance product, contact a certified financial advisor for professional advice.

Sources:

1. Budgeting 101: How to Budget Money
2. Disclaimer