
What is home equity and how can you access it?
If you have been paying off your mortgage diligently, chances are you’ve accrued some equity over the years. Equity can be used for a number...
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AgreeBudgeting can sound hard and tedious but once you understand how it works, it can help you save money and meet your financial goals. When we talk about budgeting, it doesn’t mean you have to be a hermit and not spend any money but instead, have a plan for managing your money and expenses which includes spending on items like entertainment, luxuries and other things.
Once you learn how budgeting work, you will be able to spend money without the uncertainty or worry while making sure you are on the right track.
A budget is simply a detailed description of what income is coming in and what money is going out.
A budget plan gives you a clearer picture of your spending habits and what is important to you and what expenses you can cut down to help with achieving your financial goals.
A budget planner doesn’t need to be hard but will require your commitment to start at the beginning of a certain time period, such as the beginning of a new week or month. Follow these steps to create your budget:
Step 1
Start with entering all your income that you receive such as your salary, interest, dividends, investment income and any family allowance or benefit payments you receive
Step 2
Work out your expenses including debt repayments, that come out of your income such as your rent or mortgage payments, car loan payments, credit card payments and insurance premiums. Other cost such as car registration costs and school fees should also be included, as well as utility bills like your electricity, gas and water bills. Remember, many of these are issued quarterly, so if you are creating a monthly budget, you may need to convert the quarterly bill to a monthly figure.
Converting Formula to monthly
Fortnightly: (Fortnightly Payment x 26)/12
Quarterly: (Quarterly Payment x 4)/12
Step 3
Have a quick look at your bank statements from the last three months and find payments for items such as food, entertainment, shopping, fuel. These expenses are irregular expenses and easily missed but it should be included as part of your living expenses if this is going to be an ongoing expense
Step 4
The budget plan is only effective if your income and expenses are realistic otherwise you may not follow through with your plan. Having a clear vision on your finances can also tell you how to make the necessary adjustments when considering your financial goals.
If the budget is positive, then you can put that money towards your savings goals or into your home loan to reduce your interest calculated paying off your home loan sooner. You can use the extra repayment or savings calculator to see how much you can save.
When your budget shows a negative figure then you need to review your spending habits and work out if your existing spending habits is necessary. A negative budget means your expenses is greater than the income you bring in. This will have a negative impact in the long term and may not be sustainable if you are thinking of taking on more debt.
There are plenty of advantages to budget planning, but these are some of the most important ones:
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Read MoreAny calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn’t take into account any product features or any applicable fees.
*2.19% Interest rate based on an Owners Occupied, Principal and Interest, 3 years fixed period, minimum loan size of $250,000, maximum LVR of 80%, over a 30 year term. Eligibility subject to servicing requirements, contact one of our specialised mortgage brokers for more information.
^3.27% Comparison rate based on a loan of $250,000 over a 30 year term. WARNING: The comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Costs such as redraw fees or early repayment fees and cost savings such as fee waivers are not included in the comparison rate but may influence the cost of the loan.