So you’ve just got your first pay cheque and the temptation to go and blow the whole lot on a new wardrobe or a deposit on the car of your dreams will be huge. But you know that you also have to pay those boring expenses like rent, food and petrol. So how should you be spending your pay cheque? Watch Episode 1 of the Change In your Pocket series for tips on how to make your pay cheque work for you.

Debt counseling specialists Octogen researched what a typical household spends as a percentage of their budget in various categories.

35% on household expenditure: this includes spending on food, communications, entertainment, security, domestic wages, travelling costs, water, electricity and school fees.
25% on financial services: this includes long-term life assurance products, short-term insurance, medical aid, pension contributions and longer-term savings. If you’re contributing to your company pension fund this would be taken off before your salary is paid into your bank account so you need to adjust accordingly.
35% on debt repayments: this is the absolute maximum you should ever be spending on debt – the less the better. This includes your mortgage (or rental), car repayments, credit cards and store cards.
5% on emergencies: this is money allocated specifically for emergencies and not long-term savings.
For example, for a household with a total income of R30 000, their allocation would be:

R10 500 on household expenditure
R7 500 on financial services
R10 500 on debt repayments
R1 500 on emergency savings
What Octogen found when reviewing thousands of actual household budgets is that most households spend around 47% of their budget on debt repayments. In other words the typical household earning R30 000 is spending around R14 100 per month on meeting debt repayments. The 12% extra (R3 600) that households are spending on debt comes straight from the savings category – the average household invests only around 15% (R4 500) into financial services.

Considering the cost of medical schemes, this would be mostly absorbed by medical cover and any compulsory life cover or company retirement fund. So any attempt to improve one’s savings has to start with getting rid of the debt payments.

So now that you know how much you should be spending, how does your current budget stack up? Look out for our video on budgeting, to get you started.

September 21, 2015-Maya Fisher-French