However, it’s worth it, and it’s a good feeling to put that sold sticker against the massive picture of your new home.
The 4 Step Process of Budgeting
1. Itemise your income – list your wage, share dividends, interest on your money in the bank, and any item that earns you income.
2. Itemise your unavoidable expenses – list your utility bills, car mortgage, rent, car registration and insurances, personal loans, HECS repayments and credit card repayments.
3. Itemise your avoidable expenses – list your expenses for entertainment, restaurants, shoes and clothes, taxis, gifts, and hair and cosmetics.
4. Estimate money left over – doing this will help you evaluate your spending trends and make changes.
Note of the following practical budgeting tips:
- Document all your spending over 30 days. This will help you see and realise where your money is really going.
- Overestimating instead of underestimating your spending is better.
- Organisation is vital – don’t make a guess of the figures, take out your old bills and look at the real amounts. Determine what’s left of your money down to the last cent.
- Check your bank records, balance your cheque book and mull over your budget strategy on a regular basis.
- Be conscious of your spending by making a grocery shopping list and following it. Make price comparisons when purchasing big ticket items and never buy without thinking it over first.
- If money remains tight consider going without something – takeaway dinners (buy cookbook and cook your own meal), your gym membership (go jogging instead) - even if it’s just for two months. Your savings each month could be put into your deposit.
- If you are a smoker, ignore the health benefits from quitting – just think that you’d be able to save.
- If you have major events approaching, prepare for them over a period of months, and don’t depend on your credit card.
Take advantage of your new-found savings – place them in a high interest online savings account where you can’t access it using the ATM.
Budgeting and your home loan
- Borrow for your home loan only the amount that you can afford – make sure your income surpasses your mortgage repayments, with money left over to be used for planned and unplanned expenses.
- Take into account interest rate increases into your estimates. Imagine rates are 2% more than the present levels and determine if you can manage to pay for mortgage repayments.
- Review fees and charges. See if there is advance repayment or exit fees for the mortgage products you’re evaluating.
- Never accept increased credit card limit offers – at least until you are easily paying your monthly mortgage.
- Follow a simple life – the conservative you are in your spending, the more savings you can have to pay off your mortgage.
- Repay more than required if you can afford it – the more principal you repay, the lower the interest costs. Paying more when you can, allows you to take some time off, say for maternity leave and still be able to lower your repayments and not worry of getting too far behind.
- Pay your debt on time to keep a good credit history. If you break up with a spouse or partner, continue to pay off your home loan. If you don’t you could ruin your credit record.
The above tips can hopefully get you started and thinking like a saver.
Remember to ask for advice from a financial expert like your bank manager, mortgage broker or third-party financial advisor who can ensure you’re obtaining best rate for your savings, your home loan and that you’re running your finances in the most efficient way for your standard of living.