Budgeting is not about deprivation

Budgeting is not about deprivation

Article by Anne Hartley

When Sara arrived home after a two-week holiday on the Gold Coast with her two children, she was confronted by a stack of bills. The holiday they had just had, the children’s Christmas presents, the new school uniforms, the clothes she was wearing, all had yet to be paid for. As she would not be receiving a pay cheque for another two weeks and was nearly out of cash, Sara was planning to charge the groceries, the petrol, the telephone bill and her parking fine as well.

Sara said ‘As I looked at the growing stack of bills I felt sick, but what could I do? All my salary goes to pay the old debts and there is never any money left over to save or pay current bills with. It’s a vicious circle that I’ve been locked into for years.’

To the average person the solution seems simple: stop spending. To countless person like Sara it’s really not that easy because she didn’t know where to start.Planning

Life does not stand still. Either you decide where you want to go, or events and other people will carry you along and you may not like where you end up. A plan does not have to be a complicated or a detailed list of procedures. In some cases it can be extremely simple.

The easiest way to find out where your money goes is to carry a notebook with you for a month and write down everything that you spend. You may be surprised at where your money really goes. Even if you find this exercise depressing, it is something that you need to know. Knowledge allows you to make choices. Staying in the dark takes you nowhere.

Begin with a budget

If you live beyond your means, you can take practical steps to control your spending by making a budget. I personally don’t like budgets that are too rigid. A budget should be as individual as you are.

Budgets, like diets, need only be adopted for short periods. Once your affairs are in order you can adopt a more flexible approach. A budget can be broken up into various categories such as: household expenses, travel, personal expenditure and so on. Once you gather all your figures, you can then assess if there is balance between the categories. Is a large proportion of your income being spent to repay loans as a result of compulsive spending? Are you living within your means? Have you allowed money for fun? Have you put yourself first by allocating some savings?

A good budget allows for the unexpected and it should always be flexile. Allowance should be made for fun, otherwise you’ll never stick to it.

Budgeting tips

*Make a budget to suit your pay period. If paid monthly, then calculate all costs on a monthly basis. If paid weekly, estimate all expenses on a weekly basis. Don’t just multiply weekly expenses by four as some months have five weeks. Multiply by 52, then divide by 12 to bring it to a monthly figure.

*Revise your budget at least once a year

*Make the first item on your budget an allowance for something that makes you feel prosperous. This money can be spent on yourself to cultivate a prosperity consciousness. Place regular savings towards your goals at the top of your list as well.

*Allow for incidentals, such as magazines, dry cleaning, subscriptions, sport, putting, presents, hairdresser. These are things we tend to forget.

Having made your budget, add up all expenses and subtract from your income. Do you have a positive or negative cash flow? If you have a positive cash flow then you may wish to allocate this money towards your goal. If your cash flow is negative and your expenses come to more than you earn, then you will have to reassess your spending habits, or find ways to increase your income.

Sara said, ‘For four pay periods, I kept a record of everything I spent and once a fortnight I paid bills and formulated a plan for the next fortnight’s spending. Previously I had just banked all my pay and would keep drawing money until there was no more. Now I’m more organised.’

‘Making a workable budget was probably the hardest thing, because I knew it had to be one I could live with. The children had to give up their skating lessons and I planned our menu a week ahead and cooked a few meals on Saturday. That eliminated a lot of takeaway food and saved us quite a lot of money. I gave myself a weekly allowance. It was only small at first, but it was mine, to spend however I liked, and I started saving a week.’

Save regularly now, no matter how little. Open a ‘wealth account’ and use it for no other purpose than to build a base for future investments. This in turn will achieve your major long-term goals. Saving is vitally important, not only for you personally, as it does help to make you feel secure and prosperous, but it assists our economy as well. People who save help both the economy and themselves.

Enjoy you money. Don’t think of it as a pile of money growing, unless that is what motivates you. Think of it instead in terms of lifestyle, a holiday home, a travel fund, the car of your dreams, or a home by the sea.

About the Author

When Sara arrived home after a two-week holiday on the Gold Coast with her two children, she was confronted by a stack of bills. The holiday they had just had, the children’s Christmas presents, the new school uniforms, the clothes she was wearing, all had yet to be paid for. As she would not be receiving a pay cheque for another two weeks and was nearly out of cash, Sara was planning to charge the groceries, the petrol, the telephone bill and