Budget Tips

Budget tips to help you reach your goal

Budgeting is something that many of us don’t like to consider as we think it will tie us down. But if you really stop and think about it, budgeting is simply a means of looking at your income and expenditure and deciding on what is most important to you.

How to curb impulse buying

Next time you are tempted by an unplanned purchase, ask yourself:

• Do I really need it?
• Will I really use it?
• Is the price likely to be reduced at an end-of-season sale?
• If I don’t buy it now, do I want it so much that I will make a special trip later to come back and buy it?

Tip: The 30 Day Rule

Do you really need to buy it now? When the impulse bug bites you, stop. Just walk away, and write the item down and sit on it for a month. By removing yourself from the shopping environment, the “had-to-have-it-now” emotion quickly fades. What you may find is that after a month, you simply won’t care whether or not you have it.

Keep a Financial Diary

• Select a defined time period eg a month or 4 weeks;
• Record all of your spending in a notebook, create as many categories as you need e.g. petrol, lunch, transport etc;
• Ensure you include small items such as snacks, drinks, parking meters, tolls, donations etc;
• At the end of the month, use the category totals as part of your annual budget;
• Decide how much you wish to spend in each category, and work towards to;
• You may choose to look for any spending that was spontaneous, wasteful or a luxury that you could do without in the future.

Add up your earnings each week (or fortnight or month)

Subtract regular payments or basic expenses:

• Rent or mortgage repayments;
• Food and household needs;
• Utilities (phone/electricity/water);
• Transport expenses (travel passes, petrol, car registration, maintenance);
• Health needs;
• Insurance (health, house, car, travel etc.)
• You should include yearly expenses such as car registration and insurance in your budget. You can divide these totals by 52 for the amount to budget for each week (or divide
  by 26 for the amount to budget each fortnight or by 12 if your budget is calculated on a monthly basis).

Subtract regular payments for lifestyle bills and expenses:

• Entertainment;
• Clothing;
• Personal grooming;
• Home appliances;
• If you are not sure as to how much you spend, either make an estimate and review it after 3 months or consider tracking your spending for a month.

Allocate additional funds to cover

• Loan repayments;
• Additional superannuation contributions;
• The amount of money that is left can be used to buy things that you want or to save.

Saving

Saving may appear to be difficult and disciplined, but think of the feeling of being able to afford to buy something you have wanted for a long time. Here are some tips to help you on your way.

Set yourself a savings target

Aim to save 10% of your gross annual income. This breaks down to 5% for short-term goals and 5% for long-term goals.

Tip: the 10% rule

If you’ve never been a successful saver before, start off slowly. Leave committing to medium or long-term goals for a while until you’re confident a saving strategy is within your reach. Set yourself one short-term goal – perhaps 3 months away – that requires only a small amount of cash. Then set aside 10% of your income each week in a separate savings account. At the end of 3 months, withdraw the cash to pay for your small goal – perhaps a weekend away or a new piece of clothing – and if there is any money left over make that the first installment in your next savings goal.

Remember to allow for unexpected debts and emergencies e.g illness in the family, loss or breakage of possessions, career interruptions etc.

Tip: how much is enough?

• Singles and couples should consider developing an emergency fund equal to 2 months take-home pay in case of retrenchment or emergencies.
• Those with young families should aim to build up an emergency fund equal to 3 months take-home pay.

Quick budget reminders

• Don’t make your budget so tight that it’s impossible to keep;
• A budget is not set in stone. It is there to help, not hinder you. A sign of a successful budget is one that is flexible during tough times and able to reward you when your prospects are brighter;
• If you blow your budget one month, try to make up for lost finance in areas that are more flexible e.g entertainment or eating out;
• Revisit your budget every 3 months to see if there are any areas you can tighten up to improve your financial flow.
• A budget isn’t meant to deny you of simple pleasures, like a cup of coffee every morning. Once you’ve paid your bills, saved for the future, and tucked some away for emergencies, the rest you can spend guilt-free! Feels good doesn’t it?