Budgeting Basics: Part 1
Getting the Basics Right
Do you want to live within your income – to be able to pay bills – to save?
Here’s some ideas on where to start:
Find out what you’re earning and what you’re spending
Few people know how much they spend on a weekly, monthly or annual basis. Is this you?
Keep a spending diary
A simple tool that few people do. At the end of the week add up what you spent and analyse what you spent it on. Many people are shocked at what they are actually spending.
Put systems in place
Here’s some ideas:
Have a budget and stick to it
Set up a savings plan
Set goals
Delay purchasing consumer goods
Hold a regular spending debrief with loved ones
Keep receipts and check them against statements each month
Check your budget before making a commitment to a loan of any sort
Getting the banking and payments structure right
If you haven’t already done so, structure your bank accounts. Instead of having a current account and possibly a savings account, set up accounts for Income/Spending, Bills and Savings. Set up automatic payments on the income/spending account to transfer the budgeted bills and savings amounts to the appropriate account a couple of days after your salary/wages/benefit etc has been paid into your income/spending account.
Learn to shop around
Budgeting requires thought and reflection. Be aware of the cost of items/services/utilities. Review utility, insurance etc costs periodically and compare retail goods pricing before purchasing. Get more than one quote for repairs and maintenance, renovation and so on. In appropriate instances ask yourself “do I need it or just want it?”
Be honest with yourself
It’s all too easy to come up with excuses why you’re different. Perhaps your morning coffee is your sanity time, you buy takeaways because you work long hours, Coca Cola really is an essential grocery item, you don’t earn enough to save, you need a new car because the old one “might” break down etc. Are you really, from the bottom of your heart, being honest with yourself?
Spend less at the supermarket
Can you determine what are “essentials” and what are not in order to shop wisely and within budget? Write a shopping list, plan meals ahead, look at the price per unit of everything you purchase, is the item value for money. Eating better doesn’t necessarily mean spending more.
Old-fashioned budgeting can work today
Before EFTPOS, credit cards, online transfers, direct debits etc, people used envelopes or tins for budgeting. Their income came in cash and they divided it up into the different spending categories. When the money ran out it was a case of wait until the next pay day before spending that category again. For low income earners this method is particular useful.
The end result
All of the above takes discipline and doesn’t happen overnight. But if you can make a start life will get easier and more enjoyable as you learn to control your money rather than the money controlling you.
