The budget……some people would associate this word along the lines of the Black Plague but this doesn’t have to be the case.
Many people don’t like the thought of making a budget because they are afraid of what they will find. It can be painful and scary but once you have control over your finances, you will find an amazing inner peace.
A budget is about making sure you are spending less than you are bringing in and planning for both. It allows you to find out exactly where you are currently sitting.
A budget can be so much more than that. A budget can give you power. It can provide decisions on whether you can buy something or not. It can give you permission to buy something, when you would normally have questioned your decision. It will allow you to prepare a debt management plan.
A budget can also give you inner strength to make life decisions. Maybe you are planning a job change, maybe you have been bullied at work and need to leave or take some time off, maybe you are in a difficult personal relationship and need to leave. It can protect you and your children against domestic violence. Maybe you have been given a once in a life time opportunity. How do you know you have the ability to do any of these things unless you have a budget which tells you. Best of all – when your bills come in, you will actually look forward to opening the envelope because you already know you have the money to pay them.
A budget is just a plan of where you are now and where you are heading, so you can reach your goals. For those who are in a relationship, it is very important that you sit down and agree together on the budget or one of you will resent the other for restricting their spending and if both of you do not have the same goal, this will only cause arguments.
Like everything, practice makes perfect. It will take a few go’s to get it right. However, the biggest wealth building tool you have, is your income and the best way to harness your income is the monthly budget.
As you get better at budgeting and paying off debt, you’ll become better and more capable of adjusting to cover emergencies. We all need an emergency fund. To start off with, you need to create an emergency fund of $1000. This will stop you reaching for your credit card when something goes wrong.
Events such a change in your income or accommodation arrangements, children leaving or returning home or consolidating loans can all impact on your finances. Your budget will need to change in order to accommodate them. Therefore it is important that you sit down and review your budget at least every 6 mths and make sure you are still on track.
A word on Tax Returns – if you are getting a big check back from the ATO each year, that’s actually a bad thing. Why?? Because you’re just getting back money you have overpaid. It’s letting the government use your money interest free for a year. Don’t be tempted to have extra tax taken out of your pay as a “forced savings” plan. With the right budget, you will soon see your own savings growing before your eyes. Better still, you will earn interest on the money or if you have a mortgage offset account, you will reduce your monthly interest outgoings.
Sounds easy? It can be – but it also requires some discipline. Every time I have helped someone with their budget over the years, it has been the small random expenses that throw out the budget. Hidden expenses that creep onto a credit card. Sacrifices have to be made sometimes to do to that lunch or movie that you have been invited to. You have to trim another expense to cover the outing or sometimes you have to learn to say “No”.
If anyone would like more information about how to get started on their budget, I would be happy to help.
Natalie Carey
Credit Advisor
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