How is your budget? Surplus or deficit?

This article provides some basic guidelines on monitoring spending and reducing unnecessary expenditure. Very simplistic but sometimes that’s what is needed to get the message across.

Each year in early May, the Treasurer delivers the Federal Budget and many people across Australia listen intently. The Budget tells us how the government plans to spend its revenue in the coming year, whether it can afford to give us tax cuts, and whether it expects to spend more (creating a deficit) or less (creating a surplus) than it receives.

Budgets are also important on a personal level, especially when living costs are rising and uncertainty abounds. So it’s worth having a look at how we’ll cope with the increasing cost of living.

Save more or spend less?

Is it easier to save more, or to spend less?

They might sound like the same thing. After all, saving is what we do with whatever’s left over after spending, isn’t it?

Well, not quite. You see, it’s easy for spending to get out of control, and many people actually find it easier to focus on reducing their spending than saving towards a goal.

Take control

To begin with, work out where your money goes. Start by keeping track of everything you spend and what you spend it on. Split it into categories based on necessity. Things like mortgage repayments, utilities and essential food obviously go in the ‘must spend’ group. Some things will be ‘optional but important’, and others will fit into the ‘frivolous’ category.

Do I really need this?

After a few weeks you’ll have an idea of where your money is going then it’s time to start asking yourself a couple of questions:

• Do I need to spend this much on this category?
• When I over-spend, what can I do to prevent it happening again?

It’s worth remembering that every year in Australia we spend billions of dollars on food we don’t eat, clothes we never wear and services we don’t use. So for many people, gaining control over spending doesn’t mean ‘doing without’, it just means being sensible about spending. There are a lot of things you can enjoy for free, and you can even turn a ‘thrift campaign’ into a hobby.

Watch debt

Pay off credit cards within the interest-free period to avoid high interest costs. If that’s not possible, investigate consolidating high-interest debt into home loans or other lower cost loans. When borrowing, make sure you leave a ‘comfort zone’ to ensure you can meet your commitments.

If you need assistance in preparing a personal budget that doesn’t force you to do without or give up everything you love, talk to us.