There are two types of budgeter – those who know exactly where every dollar is spent and those who don’t. Which one are you? Managing your household budget is very simple when you have the tools. It can be as easy as 1, 2, 3.
When it comes to budgeting we usually fall into one of two camps. Those of us who account for every dollar spent down to the last cent by item or cost; and those of us who live month by month, just managing to cover our major fixed costs like the mortgage or Council rates, and spending whatever is left over. Nothing is saved.
For families, understanding your spending patterns is a group conversation. Talk about what you buy and where the money goes. Suggest that by agreeing to ‘go without’ some of the extras, the unimportant items each month, you may be able to afford a special family holiday or upgrade your car.
But more importantly, by putting money aside each month you will relieve some of the financial stress that can keep you awake at night.
The simplest way to start a savings plan is to break down last year’s bills or spending into three groups:
1. The mandatories such as rates, mortgage, school fees;
2. The weekly food bill, transport or petrol; and
3. Personal discretionary spending.
Calculate the total annual cost. Then divide it by how often you are paid your wage or salary. If monthly, divide by 12; if fortnightly by 26… The answer will indicate the amount of take-home or net income you’ll need to afford your lifestyle. Then open three bank accounts and allocate a portion of your take home pay to cover groups 1 and 2. If you can, adding a little extra will take care of any additional unexpected costs. The money left over is your personal spending money, to do with as you please. But you should only draw cash from your personal spending account and when the cash runs out, it runs out.
Sticking to a budget can be challenging, but also rewarding. By keeping your savings plan simple, the life you create for your family will become one of choice, not compromise.