Why budgeting isn’t about restriction – and how the 50/30/20 rule can help

Budgeting should be a practical tool, not a punishment, says Smith, as he breaks down the popular 50/30/20 budgeting rule.

Speaking on 702/CapeTalk, Smith said the rule helps people organise their money into realistic categories: needs, wants and savings.

Breaking down the 50/30/20 rule

Smith explained that the rule suggests allocating 50% of income to essential needs such as housing, food, transport and electricity. Thirty percent is set aside for wants – things you can live without but enjoy – while 20% goes to savings and additional debt repayments.

"Needs are the things you can’t live without. Wants are the things that make life enjoyable, and savings are about the future you,” he said.

He stressed that the 20% savings portion can also include paying more than the minimum on debt to reduce balances faster.

Budgeting should match how you’re paid

Budgets should be structured around how income is received, Smith said, noting that most South Africans budget monthly because salaries are paid monthly.

“The period of the budget is determined by when the income comes in; that’s what makes it workable,” he explained.

Why a budget must be written down

One of Smith’s strongest messages was that a budget must exist outside your head.

“A budget in your head is not a budget, it’s an idea,” he said.

Writing it down, whether on paper or digitally, creates accountability and exposes hidden spending habits that are easy to ignore during the month.

“It’s often the small, emotional spending that adds up. When you write it down, you suddenly see where the money actually went.”

Budgeting as a habit, not a pass-or-fail test

Smith warned against seeing budgeting as something you either succeed or fail at.

“It’s not there to make you feel bad. Financial discipline is like any other discipline; it takes time to build,” he said.

He often advises clients to start by simply tracking spending for a month before trying to change behaviour.

Making room for enjoyment

Importantly, Smith said budgeting should acknowledge human nature.

“If you treat budgeting like it removes all joy, people won’t stick to it,” he said, adding that controlled spending on hobbies, entertainment or small luxuries is healthy, as long as it’s within your means.

Problems arise, he warned, when wants are financed with credit.

“That’s when you’re no longer budgeting; you’re borrowing to fund a lifestyle.”

A tough reality for many households

Smith acknowledged that saving is increasingly difficult for many South Africans due to weak economic growth, high interest rates and limited disposable income.

“There’s a real link between what’s happening in the economy and what people can do in their homes,” he said.

Where to get help

Smith, who now focuses on education at Boston City Campus, encouraged listeners seeking advice to consult certified professionals via the Financial Planning Institute of South Africa.

“Check that your planner is properly certified. It makes a difference,” he said.

Ultimately, Smith said budgeting is about control, clarity and intention – not deprivation.

“It’s a guide. It helps you decide what matters most to you and spend accordingly.”

For more details, listen to Smith using the audio player below: