Budgeting

Why is it that no matter how much we earn we always seem to spend it? Money just seems to disappear these days and whilst we may be having a good lifestyle I think you will find we do waste alot of money that could be better used to reduce debt of assist with our retirement. one way to keep a handle on your funds is to complete a budget. Now I know this is not for everybody but the people I know that actually use one on an on-going basis reckon they are the best thing since sliced bread. Even if you do not want to go down the path of a strict budget where you allocate specific amounts to spend in certain areas and keep track of them you could do worse than spend some time doing a one off honest budget of what you spend your money on over a year.

Quite often you will realise you spend more than you earn and this is where we get into trouble with credit cards etc. If you want to scare yourself then "click here" to access a spreadsheet that you can complete. There are numerous other budget forms around but many of them you have to pay for but if you do not like the set up of this then just go to Google and you will have access to heaps of different ones. An old savings saying is that you should put away 10% of each pay packet into savings and I can guarantee if you did this you would probably live the same lifestyle but have a nice pot of money at the end....

What I have done personally is list my fixed expenses on an annual basis, for example electricity $1000, Phone $1000, Rates, $1500, Insurances $2000. I divide this by 26 and then add my other costs such as estimate for food, fuel, beer, going out, presents and so on. Once I have a fortnightly figure I add 10% and this is how much I put into a separate account that I use for all these items. When I shop I take the funds from here, when I pay a car bill it comes from here and this way I can pretty much cover my out goings.

For large items I try and organise them to be spread as evenly as possible over the year. Rates are usually July Aug so I have my car and house ins come due in March and Car rego later in the year, this is easily done by paying 6 monthly and then reverting back to annual payments.

If you are planning a big expense such as holiday it is a good idea to keep these funds separate and a good idea is to place them in an offset account or redraw facility against you home loan, thus reducing interest as well as keeping them out of sight.

Normal savings can be used in this way as well or placed in an account such as ING Direct who offer a no cost 24 hour access account over the net at a high interest rate, just check their website for details.

If you are spending more than you earn then you need to increase income or reduce costs or else your debt will just rise and put you under more pressure. Deal with this sooner rather than later and seek advice if you are not coping.