|
Use a Budget
Every person or household should have a budget. A budget allows you to plan ahead what income and expenses you will have and how you will pay for them.
What do you currently spend?
It is important for families to understand their current spending habits prior to establishing a budget. By monitoring every cent of their spending over a 3 month period, families will be able to establish where their money is going. There are some good programs available to assist with this including Microsoft Money and Quicken.
Set your budget
The first part of a budget is to look at your expected income for the next 12 months. This might come from your wage, own business or investments.
|
 |
| Australian Money |
|
|
| Then consider your expenses. When you design a budget remember to include all the household expenses you incur throughout the year. Examples of these are listed below. |
| Assets |
Furnishings, garden, electronic |
| Bank Charges |
Account fees, interest, redraw fees, settlement fees |
| Car |
Fuel, insurance, maintenance, registration, membership |
| Charitable Donations |
|
| Clothing |
|
| Education |
Financial, books, childcare fees, kindergarten fees, school fees, sporting fees |
| Gifts |
Family & friends |
| Healthcare |
Pharmacy, doctor, dentist, personal care & eyecare |
| Holidays |
Accommodation, travel, activities |
| Household Expenses |
Electricity, gas, home and contents insurance, rates, repairs and maintenance, telephone, water |
| Insurance |
Health, income protection, life |
| Investment |
Shares or property fund, superannuation contribution |
| Leisure |
Entertaining, gym membership, photos, sporting goods, events, tapes, CD's, DVD's, toys, games |
| Living Expenses |
Dining out, alcohol, supermarket and food, mobile phone |
| Mortgage |
Interest on Loan |
| Taxes |
Income Tax |
|
| There are two key elements of a budget that people often forget to include.
The first is a contingency expense of 10% of your income, for unforseen expenses that arise throughout the year. These may include additional medical expenses, breakdown of a washing machine, dishwasher, hot water service, or financial education, over and above what you have already budgeted for. This ability to budget for unexpected events will remove the extra stress at the right time.
The second is to budget for saving and investment. Ideally you would allocate at least 20% of your income for savings and investment, but 10% would be a great start.
Review budget versus actual.
An important part of the budgeting process is to review your budget figures against actual income and expenses to ensure you are on the right track.
This should be done either monthly or at least every 3 months.
|
|
|
|
