31 Oct Holidays & budgeting: a match made in money heaven
At this time of the year, it is so easy to spend more than we earn as we prepare for the festive season and look to bring cheer to our loved ones.
This brings to mind the words of a famous poet – “To budget, or not to budget, that is the question” (well… almost his words – there may have been a bit of creative license in there.)
Our advice is to work out a realistic amount to spend on gifts for the year, that works for your situation, before you hit the shops. Start putting some of your surplus aside now too, so it’s not such a big expense at the time. Remember that it really is ‘the thought’ that counts!
As far as budgeting goes, we’ve compiled some helpful thoughts, based on information available at www.budgetingincome.com
When it comes down to it, budgeting is the most basic and effective tool for managing your money. Despite popular perception, it doesn’t have to mean giving up things you enjoy – it’s about clearly showing how you allocate your money now and empowering you with choices based on the reality of your situation, to ensure you can enjoy other things when you want them too…
Still not convinced? Check out the benefits of budgeting below:
1. Budgeting gives you control over your money – A budget is a way of being intentional about the way you spend and save your money. It is said that with budgeting, you control your money as opposed to your money controlling you. Budgetary planning saves you the stress of suddenly having to adjust to a lack of funds and helps you decide if you want to sacrifice short-term spending, like buying coffee everyday, in exchange for a long-term goal like a holiday or a new TV.
2. Budgeting keeps you focused on your money goals – You avoid spending unnecessarily on items and services that do not contribute to attaining your financial goals. If you are working with limited resources, budgeting makes it easier to make ends meet.
3. Budgeting makes you aware what is going on with your money – You’re clear on what money is coming in, how fast it goes out, and where it is going to. Budgeting saves you from wondering at the end of the month where your money went. Instead, you’ll know what you can afford and be able to take advantage of buying and investing opportunities and plan how to lower your debt. It also tells you what is important to you based on how you allocate your funds and how far you are towards reaching your financial goals.
4. Budgeting helps you organise your spending vs savings – By dividing your money into categories of expenditures and savings, a budget makes you aware which category takes which portion of your money. That way, it is easy for you to make adjustments. A budget also serves as a reference for organising your bills, receipts, and financial statements.
5. Budgeting makes you decide in advance how your money will work for you.
6. Budgets enable you to save for expected and unexpected costs – You can plan to set aside money for emergency costs.
7. Budgeting enables you to communicate with others about money – If you share your money with your spouse, family or anyone, a budget can communicate how you use money as a group. This promotes teamwork on working for common financial goals and prevents conflict on how money is used. Budgeting also teaches spending responsibility and accountability.
8. Budgeting provides you with an early warning for potential problems – When you budget and take a “big picture” view, you will see potential money problems in advance and be able to make adjustments before the problem is really a problem.
9. Budgeting helps you determine if you can manage debt and how much – Taking on debt is not necessarily a bad thing if the debt is necessary or if you can afford it. Budgeting shows you how much of a debt load you can realistically take without being stressed.
10. Budgeting enables you to produce extra money – In budgeting, you can identify and eliminate unnecessary spending like late fees, penalties and interests. These seemingly small savings can add up to be significant over time.
This information is of a general nature and is not deemed a ‘Personalised Advice Service’ as defined by the Financial Adviser Act (FAA) 2008.
Authorised Financial Adviser – FSP 76241
A copy of my latest Disclosure Statement is available free of charge on request.