In my recent article “A sustainable monthly budget – And achieved without the fun police!” I pointed out that with a few simple lifestyle changes to a hypothetical household budget I had achieved a decrease in expenditure (and thus saved) $3680.40 over a year.
The list of changes I made was certainly not exhaustive, and in fact I’m sure I could have come up with more savings had I chosen to go through every category of household expenditure.
You might be wondering why I’m mentioning that again here. I’m raising it again because it relates directly to what I’m talking about today.
I’ve often had people say to me that they can’t be bothered with, or it’s too hard to budget. Alternately they may claim that they never have any money left over each week, fortnight or month that they can save.
My answer for most people is - I think that you can’t afford NOT to save.
The reason that most people think they can’t afford to save is that they don’t have the structure of a well-defined budget that outlines what their monthly income and their fixed monthly expenses are. If you don’t understand what your cost of living actually is, then of course you will never have the capacity to save.
However, the value of a budget that helps define your monthly cost of living then also informs you as to what you have the capacity to save each month.
Expenses such as school fees, utilities bills, insurance premiums etc. DO NOT fit into the category of unexpected expenses. You know that they are going to occur each year, so you build an appropriate allowance into your monthly budget for each of these expenses.
The savings that can be generated each month then form the basis of your “rainy day” fund. Unfortunately we all have some genuinely unexpected expenses from time to time, so the “rainy day” fund is then what can be used to assist you with those genuinely unexpected expenses.
The further value of proactively budgeting like this is that it lessens the stress and anxiety that inevitably occurs in a time of unexpected expense, but it also lessens the actual financial cost of servicing this expense. By funding the expense from your own resources, you have then not had to rely on short term funding from your bank.
What this means is that you haven’t had to rely on your credit card (most likely at interest rates beyond 20%), or applying for a personal loan (again, further set up costs, interest payments, time and anxiety) to get you out of a short term financial dilemma.
Proactive management of your household budget can in fact by very empowering.
To learn more contact Leigh at Empower Money Management.
0407 439 827
Most people don’t associate the words budget, and fun, together - more often than not you can usually see their eyes start to glaze over the moment you mention the word budget to them.
For a lot of people terms like “budgeting” and “saving money” imply missing out on things they want to do and/or buy, and therefore missing out on some form of fun.
I believe that with just a small degree of planning and control being brought to a monthly household budget the fun police won’t be preventing you from doing all the things you still want to do.
Let me use a few very common examples to illustrate my point;
6 pots at the pub on a Friday night after work = $30; Taxi ride home = $20
Then, multiply the above equation by 4 to represent the number of weeks in the month.
In total a Friday night after work drink has cost $200 for the month. Alternately a carton of 24 beers (six each week for four weeks) will cost somewhere around $45. You have had the same number of beers per month, but have saved $155.
1 purchased coffee a day = $4.
If you buy 1 coffee a day for each work day you have spent $20 a week.
Using the coffee from the work kitchen costs nothing. Saving $20 each week equates to $80 each month. You have had the same number of coffees each month, but have saved $80.
Pay your utilities bills by the due date.
I will use my own current electricity bill as an example. I get billed monthly for my electricity usage. The current bill offers me a pay on time discount of $31.70. It’s a no-brainer – paying the bill by the due date means I have saved $31.70.
I recently purchased a new pair of casual trousers.
The tag on the trousers showed a full retail price of $90, however because they were on sale the price had been reduced to $50. Through buying the trousers when they were on sale I have saved $40.
(P.S. Why does anyone pay full retail for any clothing item now? – They are almost always on sale.)
I believe another significant area of saving can be something as simple as making a list of only what you need when you do the supermarket shopping. Make the list, stick to it, and only go to the supermarket once a week. Think of the amount of money saved through the reduction in waste if you purchased only what you needed on your weekly list.
Clearly I could go on with the examples, but I’m sure you all get the point.
Using my examples from above, and clearly this is not an exhaustive list I have saved $306.70 for the month.
If I can replicate just these savings each month, I will have saved $3680.40 for the year.
Imagine the potential for further savings by looking at all areas of household expenditure – How much more saving might be made?
In my example I have still done everything I wanted to do – the fun police haven’t needed to stop me because I couldn’t afford it, and at the end of the year I have at least $3680.40 that I wouldn’t otherwise have had.
My point is that wise usage of your own money needn’t be boring. Clever use of your own money can be very empowering.
To learn how I can help you to empower yourself contact Leigh at Empower Money Management.
M. 0407 439 827