Budget Planner

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:

1. Visibility
   If a budget is not in place, then you will be surprised how much you spend on a day-to-day. It can feel like it is a negligible when you buy a few extra things throughout the week such as coffee but in the end it all adds up. A budget will show you exactly how much you are spending and what you are buying is important to you.

2. Limiting your spending
   Budgeting gives you the ability to plan your spending and if you have a budget in place, you will work out where your money goes, and it also reduces the temptation to buy things that may not be necessary.

3. Being in financial control
   By being in control of your finances, you will have the peace of mind that you are on track with your savings goals. This is important because it will help reinforce the reason why you have a budget plan in the first place.

4. Financial security
   Saving money has a compounding effect. Even when you start saving small amounts of money, it can add up quite quickly. This will help create a buffer that can be used to pay for any emergency expenses that may arise.