10 ways to budget using your bank account

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Traditional budgeting methods are being phased out as apps that coach people on how to budget become more popular. Banks now have budgeting tools to help with budgeting for a variety of reasons. Whichever method is used to budget, budgeting is difficult.

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To begin budgeting, you must be mentally prepared. Jumping straight to Using a budget tool to start budgeting is a recipe for disaster. This is due to the fact that budgeting requires skills and the ability to follow such skills.

Budgeting with a bank account gives you an advantage over budgeting with other platforms. But why are you budgeting in the first place? How do you begin budgeting? Before you begin creating a budget, you must first answer the questions.

Before we get into the 10 Ways to Budget Using Your Bank Account, let us first explain why you need to budget in the first place.

Why do you have to budget?

Budgeting is required to distribute income that has been earned or income that is about to be earned in an economically sound manner. Spending does not only refer to the purchase of perishable goods and services. Spending can also refer to putting money aside for the future, which can include investments and savings.

Budgeting is thus used to allocate income earned over a set period of time. Income is divided into five categories: physiological needs, security needs, savings, investments, and esteem needs when creating a budget.

Not all spending, investing, and saving desires can be met. It is necessary to select items to budget for. The order of importance of desired items will be used to make item selections. As a result, developing a formula to determine or apportion income is required.

For example, 10% of income can be set aside for investments, 10% for savings, and 80% for spending. You will be more organized when creating a budget if you do this.

How to start budgeting

Beginning to budget necessitates a plan, which requires an understanding of budgeting as a subject. Once you’ve created a budget plan, you can move on to the next step, which is to create a budget.

Your budget must adhere to the SMART criteria. Your budget must be:

  • Make sure your budget is specific, which means it must serve a purpose. Have real numbers with real deadlines so that you can meet your budgeting objectives.
  • Measurable – your budget must include a method for evaluating results. Use targets with a time frame. If you’re going to save for a 50-inch smart TV worth R10,000.00, decide how often you’ll have save and how long you’ll save for it.
  • Attainable – the goal you’ve set for saving, spending, and investing must be attainable. It is necessary to outline the steps to be taken in order to achieve your budgeting objectives.
  • Relevant – it is not enough to simply write a budget; the budget must also be realistic. When creating a budget, do not rely on income that is not guaranteed; instead, be realistic.
  • Time-bound – your budget must have a target date in order for the goals to be met. You will be able to discipline yourself to achieve the set goals if you use time when budgeting. Money will be spent more prudently.

You will be able to begin budgeting once you understand the SMART criteria. The last thing you need is a tool for budgeting. The more efficient the tool, the better your chances of staying within your budget. Budgeting with a bank account is one of the most effective ways to achieve any set of goals.

Here are ten strategies for budgeting effectively and efficiently with a bank account.

1. Keep your account balance low

Budgeting necessitates a level of commitment that most people lack. Sticking to a budget can be difficult and sometimes draining if you find a reason to spend money that has been budgeted for.

Keeping all of your money in an account or in cash will almost certainly backfire. A bank account is a good way to budget, but money should be kept to a minimum to avoid temptations.

Access to all of your money will lead to impulsive spending, which you do not want when budgeting. Have only what you need in your bank account and no more.

As soon as the money is deposited into the account, the remainder of the income must be allocated to costs, savings, and investments. When budgeting with a bank account, avoid overdrafts, but if you have budgeted for an overdraft, you can use the overdraft amount as budgeted for.

2. Open multiple accounts

When you have budgeting goals to meet, you don’t want to hold one account. Create separate bank accounts for each of your needs. Accounts can be used for checking, saving, investing, and other purposes.

Savings, investments, and checking accounts should all pay interest on a positive balance. Savings and checking accounts that earn interest on a positive balance are available at nearly all South African banks.

To open an investment account, contact a financial institution that deals with investments, such as Allan Gray. You will have a plethora of options to choose from, and your money will earn interest.

Accounts with guaranteed capital protection should be prioritized. Unless the account is a share investment account or a cryptocurrency investment, no guarantee on the principal amount is required.

3. Use stash accounts

Nowadays, checking accounts include a stash account, also known as a savings pocket account. When this account is used, no charges are incurred, and there are no monthly fees associated with the account.

Use a stash account to save money that you don’t need right now but will need in the near future. A stash account, on the other hand, does not pay interest on a positive balance but is still a good account to use.

Money in a stash account can be accessed at any time; however, because a stash account cannot be linked to a card, you will be unable to transact online or in-store.

4. Use a savings accounts

Savings accounts come in a variety of shapes and sizes. When budgeting, you can open a savings account with your bank and transfer funds from your checking account to your savings account.

You have the option of opening a notice account, a fixed deposit account, or a tax-free savings account. The type of savings account you select will be heavily influenced by how quickly you want to access your savings.

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The advantage of using a savings account over a checking account is that money in a savings account earns interest. The interest rate on a savings account can reach 10.50 %.

Keeping money assigned for savings on a budget in a checking account makes no economic sense. A savings account is the best place to put money aside for an emergency fund since the account is very liquid in nature.

5. Open a share account

Open a share account if you want to invest a portion of your income in the stock market. Free share investment accounts are available from banks such as FNB, Investec, and Standard Bank.

If you want to trade with the aforementioned major banks, you can open a share account. If you want someone else to trade your money, you can talk to a wealth manager at your bank or seek assistance from investment banks like Allan Gray and Alexander Forbes.

When you open a share account, you don’t need a lot of money to get started. An account can be opened with as little as R100.00 – R500.00. Income from your primary bank account can be automatically deposited to your share account in accordance with your budget.

When opening a share trading account, keep an eye out for any account-opening fees. Charges for opening a trade, as well as withdrawal fees, must be thoroughly scrutinized.

6. Open a fixed deposit account

To better manage your finances, you should open a fixed deposit account. A fixed deposit account should be considered when budgeting for savings and investments.

The principal amount deposited into a fixed deposit account is guaranteed. It not only guarantees the principal amount but also provides a very high-interest rate.

If you want to save money for items that you want to buy in more than a year, you should open a fixed deposit account. You are more likely to receive the highest interest rate if you save a large sum of money in a fixed deposit account.

The interest rate on a fixed deposit account changes nearly every month and is primarily determined by the lending rate. When opening a fixed deposit account, choose a fixed interest rate.

7. Automate transfers to relevant accounts

Budgeting with a bank account is extremely beneficial because there is technology available at a low cost. Budgeting has become much easier now that we can automate payments to specific accounts.

Using a bank account allows for a more accurate distribution of income to expenses, savings, and investments. Payments to accounts can be made on time, whether through interbank transactions or transfers to other banks.

The automation of payments to various accounts will assist you in meeting your budgeting objectives. Every transaction that must be made to a relevant account that must be paid, whether it is an expenditure account or an income account, must be automated.

Learn how to make automated payments using the mobile app or internet banking provided by your bank. Then, link all of your accounts payable to your banking profile and set payment dates and frequencies.

8. Allow pop up balance alerts

You need to know if the money distributed has been apportioned after automating payments to relevant accounts. Mistakes can occur, and as such, they must be ratified. And getting alerts on transactions in your bank account is one way to find out if you’ve made a mistake.

Get in touch with your bank by simply subscribing to receive messages via phone and/or email. All transactions will be communicated to you, and you will be able to keep track of your money. 

Some banks do not send alerts for transactions worth less than R100.00, but others are more lenient and will send alerts for amounts as low as R50.00. Other banks, such as FNB, send alerts via mobile app and email for any amount transacted.

9. Have restrictions on different accounts held

Withdrawals, particularly from savings and investment accounts, should be avoided. If you are budgeting for a specific asset, you will save money by not using your money until it is due.

Put restrictions on your accounts, including your check account, where your income is deposited. Minimum withdrawal amount can be one of the restrictions.

Money in savings and investment accounts must be strictly limited. You can contact your bank to restrict your access to your accounts.

10. Reconcile statements with invoices

At the very least, the bank statement and invoices must be reconciled at the end of each month. It is possible to do it on a daily basis, but it is time-consuming and costly, so monthly reconciliations are highly recommended.

Since you receive alerts on your mobile app or via SMS, you can reconcile in a timely manner if you have the time. Errors are easily corrected, and you do not need to view the entire monthly statement to determine if a transaction is incorrect. As a result, you can correct errors as they occur in real-time.

Conclusion

Budgeting with a bank account is something to think about because many people consider it to be the most innovative way to budget. You will be able to track your money in real-time, make timely distributions on savings and expenses, and have constant access to up-to-date information about your finances.

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Staff Writer

Published by
Staff Writer