Budget....is not a dirty word

How many of us know what it actually costs us to run our lives? Such a simple thing but the answer is often unknown, I am inviting you to have a think about it. Because, at the end of the day, it gives you certainty and there’s comfort in that – and it lets you know what opportunities you can consider taking.

I’ll give you another tip, if your personal loans and credit card balances are growing each year the uncomfortable truth is you are spending more than you earn and you need to stop and get a handle on where the money is going now so you can look at how to turn this around. You’re not alone in this, by the way.

I know ‘budget’ sounds like a dirty word, but, doing a ‘budget’ will allow you to really understand your costs and your ‘negotiables’ (discretionary expenses the stuff that makes life fun, but, can be cut if we need to tighten our belts), and what is left over. Kind of like a business would look at its profit and loss statement, as a guide to how they’re traveling.

So I recommend you do do a budget simply from the point of view of understanding – not because we want to cut to the bone, but so we know.

With that in mind, lets break things down into broad categories:

Basic living expenses

This is the stuff we cannot live without. Lenders suggest that we include as a minimum: our expenses that relate to food and transport, electricity, water and rates, clothing, insurances, property maintenance and our basic education needs.

Discretionary expenses

This covers items which we could technically live without, as much as we don’t want to – pay TV, internet, sports and other activities.

Other living expenses

Finally the stuff that we love, but can totally negotiate to follow our dreams and goals like holidays, entertainment, gym membership and the like.

But how do we work out what we spend in each category? I have a couple of methods:

1 Try looking through your bank account / credit card statements. Most banks have the facility for you to download your transactions into an excel worksheet and if you’re familiar with excel you can add a little note in a column at the end – so – a transaction for Woolworths is probably groceries, electricity should be pretty obvious – etc. Sort the colmuns based on your notation and pay attention to money that is being spent friviously.

2 Or, try keeping your receipts for a week or two & look for what information you can find regarding your billing history – things like your electricity bill often have graphs of your previous bills (to encourage you to look for changes).

3 Look at your savings history – what do you save vs what you earn, this gives you an idea of what you spend although it doesn’t break it down into your basic expenses and other, but it’s a start.

Full article in the western weekender:

https://issuu.com/weekenderpenrith/docs/propertyapril14/26