One of the first things in controlling your money and your accumulation of wealth is to have a budget. However, many of us do not have a budget, do not treat our money as if it was a business and wonder why we are not able to save satisfactorily. Budgeting is a way or empowering yourself, to enable you to have control over your money.
Many people draw up a budget that unfortunately has oversights and which can render the budget useless. To ensure you create a realistic budget we hope the following points will assist you..
Run Your Life Like A Business
If you were a business you certainly wouldn't be happy to break-even or make a loss at the end of the year, and you shouldn't be happy doing this in life. Aim to make a profit through proper budgeting, savings and investments.
Include Annual and Quarterly Expenses
Budget for your weekly and monthly expenses like rent or mortgage payments, food, fuel, telephone, electricity but don't forget to also include rates, house and other insurances, car registration that may be non-monthly expenses.
Unexpected and Irregular Costs
Many people forget to put money aside for unexpected costs such as car repairs or medical expenses and house repairs and maintenance. These costs are more irregular than unexpected because we do know that our cars and houses require maintenance as do our bodies! So put extra aside to cover irregular costs – earn interest on these savings until the money is needed.
Remember We Learn From The Past
History teaches us a lot, so ensure you look at past expenses. Not only can you tell the costs of past car repairs and service costs, you can track when your electricity or water costs peaked perhaps with a hot summer and also medical expenses can be averaged out.
Positive Savings Plan
Rather than just saving what is left over, have a positive savings plan – decide how much you want to save and regularly put that amount aside and stick to it. Then when you have the money you can buy what you need. Some of our team at Leenane Templeton get the bank to take out 10% of their salary as it's deposited into their account and place this into an investment account, this accumulation of savings becomes unnoticed and if managed properly can become a significant investment through compounding. Speak with a financial advisor in order to see what financial plan suits your particular circumstances.
Paying attention to your savings will help you build an emergency fund to see you through some unexpected times perhaps through job loss or severe illness. Try and have at least three months worth of emergency savings.
Do pay your credit card off each month and not incur horrendous interest costs. If you can't afford to pay it off you should not have purchased the goods. Be careful with your spending and your saving and you will be amazed how much you can achieve.
It's Little Things That Add Up
That $4.00 coffee collected each morning on the way to work can cost you $80 a month, add any money you spent on take away lunch and the dollars really add up. Consider having your own filter machine at work and bringing your lunch from home (even just for a few days a week) and you will be immediately benefitting from the savings for your budget.
Be as accurate as you can be with what you know, but don't set unrealistic targets. You will only become dissatisfied and then disillusioned with the whole process. Having a budget is not to stop you spending, it is to ensure you have control, you can set your priorities and not feel guilty about spending. It is to help you understand where your hard-earned money goes and when and how you spend or save. Budgetting is about empowering you not about stopping you enjoying yourself.
Don't Overdo It
You don't have to account for every cent you spend every day. Don't let your budgetting become a chore. And don't be too hard on yourself, remember your earn money to enjoy yourself. If you have not eaten out in a month and have that money set aside and would like to attend a concert with the money do so. (As long as you aren't going to be cross with yourself!)
It's Not Set in Stone
Budgets are living documents and can be changed as circumstances change, your income may increase and some new expenses come to light so amend your budget. Be flexible and as accurate as possible.
Keep Written Records
Keeping numbers in our heads can lead to inaccuracy, so it is best to keep written records. This adds discipline as well as accuracy. This is your personal business. Keeping a simple spreadsheet will assist.
The information contained in this document is based on information believed to be accurate and reliable at the time of publication. Any illustrations of past performance do not imply similar performance in the future.
To the extent permissible by law, neither we nor any of our related entities, employees, or directors gives any representation or warranty as to the reliability, accuracy or completeness of the information, or accepts any responsibility for any person acting, or refraining from acting, on the basis of information contained in this communication.
This information is of a general nature only. It is not intended as personal advice or as investment recommendation, and does not take into account the particular investment objectives, financial situation and needs of a particular investor. Before making an investment decision you should read the product disclosure statement of any financial product referred to in this newsletter and speak with your financial planner to assess whether the advice is appropriate to your particular investment objectives. financial situation and needs.
For business advice go to www.newcastle-accountant.com.au