Saturday, November 28, 2009

Budgetting

I was truly shocked last night when I was helping a friend with her budget. She has been letting $300+ a fortnight fritter away into oblivion with nothing to show for it. Doing a budget is not hard. Sticking to one can be harder, but when you realise that if that money was saved every fortnight, in 1 year it would be $7800. That is a lot of money to be wasting.

The amount of $300 was found without even cutting back on things. If she menu planned, wrote a grocery list and stuck to it, stopped using the dryer and a few other things, she could easily save $500 a fortnight.

It really amazed me how much money people waste without even realising. As a sahm I believe it is my responsibility to try and save money where we can. I am not using it in my challenge, but it does add up. The biggest thing when saving money in one area, say groceries is to actually put that money into savings, not blow it on something else.

A budget can be as hard or easy as you like. Fortunately for me I do not have school age kids, which means things are a lot cheaper for me.

All you really need to do is write out your expenses and your income. Gather all your bills, receipts etc... to see where your money is going. Things that might be listed are

Rent/Mortgage, electricity, gas, petrol, groceries, car maintenance, registration and insurance, house insurance, mobile phone, home phone, internet, presents, school fees, land rates, water bill, make-up/hair products, education (school fees, books etc...), clothing, allowances, medical, misc...

You will need to account for everything, including savings. The only way to get ahead with money is to pay yourself first, then budget with what is left. Most people advise you to save at least 10% of your wage.

With your bills, work out what is quarterly, monthly etc... times everything to make it yearly. E.g monthly phone bill, times by 12, to get an idea of what it costs you a year.

Do this with all your expenses. Next, divide them by your pay days, whether weekly, fortnightly or monthly. This will give you a good idea of how much things cost you each pay. You should be able to see if you are in credit or debt every pay.
If you are in debt every pay, there is something wrong and you need to look at where you can cut back to ensure you are not spending more than you are earning.

If you have any debts, these will need to be listed. Once they are paid, don’t waste the money you were using to pay them off, instead save it.

Be reasonable when doing a budget. Don’t try to save every single cent, as it just wont work. Allow some money for yourself every pay, to spend on whatever you like. This helps you to not feel deprived and you can still get your “luxuries”.

The hardest thing about any budget is sticking to it. One way some people use to help them stick to it is a money tree. It is an envelope system where for each thing in the budget an envelope is allocated. For example, $200 for groceries is placed in the groceries envelope. Once the money is gone, it’s gone. No using the card. You have to make do with the money you have. Leave the cards at home.

Another alternative is a similar idea but with separate accounts. Some banks allow you to have a few accounts without incurring extra fees. Some people label these accounts “bills”, “school fee’s” etc... So each pay an allocated amount is transferred to cover these expenses, ensuring you are never caught short.

With your bills, if you set up Bpay, you can actually pay extra each pay, so when your bill comes it is not so big. For example, if your bill for electricity is usually $400 a quarter, if you pay $31 a week into your electricity account, when the bill comes it will be paid already. Plus once the money is transferred, you can’t touch it, as it is not your personal banking, you can’t get it back.

I hope these tips help you and I hope you realise the importance of having and sticking to a budget.