Budget with a Personal Loan and the 40/25/25/10 Rule
Budgeting and taking control of your personal finances can feel like a never-ending cycle of expenses versus income. But the 40/25/25/10 rule can make this easier and clearer for you. And with a little help from Capfin loans, you can ensure your finances get the boost they need to help meet your financial goals —whether it’s starting your next side hustle, buying new sports equipment for your children, or enrolling in that part-time course you’ve always wanted to take..
Here’s how applying this budgeting rule and partnering with Capfin can help you achieve financial stability
Understanding the 40/25/25/10 Rule for Budgeting
The 40/25/25/10 rule is a simple budgeting formula designed to create a manageable and effective plan for your finances. It breaks down your monthly income into four categories:
By dividing your income this way, you're giving
every rand a purpose, whether to cover essentials, pay off loans on time, save
more or enjoy life a little. Plus, it gives you a clear view of your spending
habits and helps you understand where you might need to make changes.
How to Divide Your Budget Using 40/25/25/10
Step 1: Calculate your monthly income first and write down how much you earn every month after tax. For example, let’s say you earn R10 000.
Step 2: Allocate 40% for your needs. 40% of R10 000 is R4 000, this would go to your needs (rent, groceries, transport, electricity, and water). Needs are non-negotiable.
Step 3: Allocate 25% for debt, for instance, 25% of R10 000 is R2 500. This goes towards paying off any loans or credit, like a Capfin loan. Paying off your loan consistently and on time is important. If you’ve have different credit products, consider paying off the higher-interest ones first to save more in the long run.
Step 4: Allocate 25% for wants, for example, another R2 500 can go towards your wants. This covers your takeaways, shopping splurges, and subscriptions – the stuff that makes life more enjoyable. Having a balance is essential and helps us feel rewarded and motivated.
Step 5: Allocate 10% for savings and investments finally, R1 000 is set aside for savings and investments. This is your safety net – your emergency fund or an opportunity to grow your wealth. Whether you’re putting it in a high-interest savings account or investing in the stock market, this portion will give you a solid financial footing for the future.
How a Capfin Loan Can Support Your Financial Goals
Here’s how you can use a Capfin loan without putting yourself under financial pressure.
Managing Personal Loans Within a 40/25/25/10 Budget
The beauty of this budgeting method is that it leaves room for loan repayments while prioritising savings and some fun spending. If you already have a Capfin loan or are considering applying for one, understanding where it fits into your 40/25/25/10 split will ensure you're not overextending your finances.
One of the biggest mistakes people make with loans is taking too much, too quickly. By sticking to 25% for credit, you keep control of your repayments. The trick is not to use more than 25% of your income for credit, no matter how tempting.
Another trick is to be strategic with extra payments. If you’ve got extra funds left over at the end of the month – thanks to budgeting well or not spending all your “wants” – use that to pay off your loan faster. This helps reduce the interest in the long term.
Financial Freedom with Capfin: Building a Sustainable Budget
If you haven’t tried creating a monthly budget, consider the 40/25/25/10 rule. Start by writing down your income and dividing it into those four categories. Then, adjust where necessary. Maybe cut back on wants if you must boost your credit repayment portion for a few months or use some of your wants budget to grow your savings. Flexibility is key.
At Capfin, we believe you're more than just a loan – you're someone with goals, aspirations, and the determination to make them a reality. With Capfin by your side, you can create a life where you’re in control of your finances.
With loans of up to R50 000 and repayment terms of 6, 12, or 24 months tailored to your risk profile, our simple application process means you can access funding quickly and easily. Take the first step towards budgeting smarter and empowering your bank balance. Apply online at www.capfin.co.za, via SMS to 33005, or by visiting any PEP or Ackermans store.
Learn more about loans
How to Create an Effective One-Page Budget | Capfin
It’s never too late to achieve financial fr...
Side Hustles You Can Start With a Personal Loan | Capfin
Imagine turning your passion into profit, a...
A Personal Loan for Your Home DIY Projects | Capfin
Now is the time to take a step towards fulf...
Customise Your Budget: The Pizza POV Approach | Capfin
Budgeting plays an important role in shaping o...