MONEY MATTERS MONDAY 10th DECEMBER 2018
Budgeting is Rewarding
Budgeting is boring. Some people would say it is the most uninteresting thing they can think of. Yet budgeting is rewarding. It’s especially so at Christmas time. Most of us have a fixed regular income, whether it be high or low.
It may be a small or large salary, a Centrelink payment, or a retirement pension. Even if we are on a government super pension we receive a fixed regular payment. Our income is the same every month and we must keep our expenses to that limit.
Financial advisors see people with family incomes of $200,000 to $300,000 and even more who still have credit card debts, car and personal loans. Clearly, they are not budgeting well despite their large incomes. They are unable to restrict their spending to the income available.
Make a list of expenses
A fundamental law of expenses is that they will always expand to consume all of the income available to them, and more if allowed. To prevent this happening, we need to start by making a list of our desired spending. Then we must decide what is essential, and what we can defer or manage without.
The unemployed person has to pay their rent and basic food costs and may have to give up most other desired spending. The retiree who is a keen golfer may only be able to afford to play two days per week not three. We often need to reduce non-essential costs.
We can look for cheaper suppliers of the essential items we must buy. Can we find them at a cheaper store, a discount shop, or online? If we really need a new piece of furniture, household appliance, or a new car, can we get it second hand? It is usually much cheaper.
It may be possible to buy parts and make something cheaper than buying a new item. This can apply to Christmas gifts. And homemade gifts are often appreciated more. By smart thinking and carefully allocating our money we can achieve more with the income available. That’s rewarding.
Help is available
Financial advisers can provide easy to use spreadsheets with a list of common expenditure items down the side, months across the top, and totals of each row and column. Budgeting programs are available online that do a similar thing.
Some banks offer free mobile phone apps that track our spending. They automatically classify our purchases into categories that we have set limits for. They can tell us whether we can afford to buy an item we want or not.
Prioritise, and you’ll keep within your limits
Budgeting should also be used when a windfall gain arises, a redundancy, bonus or inheritance. Make a list of the things we would like to spend the money on. It is bound to exceed the cash available. We must then prioritise and decide which items are more important. That way we make the most of our money.
This is general advice and should not be treated as personal advice. Russell Tym is an authorised representative of MoneyLink Financial Planning Pty Ltd ASFL No: 247360.
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