BUD­GETS AND BATH­TUBS

Plug those leaks

Parenting - - Contents -

The do's and don'ts of fam­ily bud­get­ing

ITom Hart­mann tack­les the do’s and don’ts of fam­ily bud­get­ing.

t’s fair to say that many of us, when faced with the idea of work­ing on the fam­ily bud­get, would just as soon run a sooth­ing bath in­stead. Yet a bud­get should de­liver the same peace of mind that comes with pam­per­ing our­selves and ‘me’ time. Af­ter all, you’re tak­ing con­trol, and your anx­i­eties ease when you know you’re steer­ing the sit­u­a­tion where you want it to go. You need this!

Bud­get­ing, in fact, should be as easy as fill­ing a bath. There are some help­ful par­al­lels, ac­tu­ally. First, we pop on the tap. We’ve got our in­com­ings for each pay pe­riod – cash flow­ing in from salaries, wages, busi­nesses, and so on. That money can eas­ily flow down the drain, which is what typ­i­cally hap­pens if our out­go­ings are as much as our in­com­ings. We’ve got money com­ing in, but just as much money flow­ing out, so not much to show for it. The bath isn’t fill­ing.

So we plug the drain. If we for­get the plug and spend more than we earn, the bath never fills. It doesn’t mat­ter whether we’re rich or poor – if we let it all go down the plug hole, we never get ahead. Ev­ery­one has to live, so we can only plug that drain so far. But the more we can, the faster the bath can fill. It may take a while, but that’s still the gen­eral idea.

Even if we put the plug in, we may still find that our tub has some leaks – un­planned ex­penses keep drain­ing it and stop it from fill­ing as high as it could.

Is this for me?

Ev­ery­one can ben­e­fit from a bud­get – not just peo­ple who are hav­ing trou­ble mak­ing ends meet. It can mean the dif­fer­ence be­tween feel­ing in con­trol and achiev­ing those goals we set our sights on, ver­sus al­ways won­der­ing where our money went and go­ing into over­draft be­tween pay­days.

The core of build­ing a bud­get is fig­ur­ing out whether we’re spend­ing more or less than we’re earn­ing. Spend­ing less than is com­ing in? We can use a bud­get to work out how much can be squir­relled away each pay­day. We call this 'pay­ing our­selves first'. Spend­ing more than is com­ing in? We can use a bud­get to see where all our money is go­ing. We can also see if there are any ways to spend less or earn more.

Bud­gets also help us see where our money ac­tu­ally goes. It's seem­ingly im­pos­si­ble to re­mem­ber what we spend money on ev­ery day. It's even harder to keep a run­ning tally of what we've spent on one kind of thing over the last week or month, like take­aways, gro­ceries or kids' clothes. Can any­one re­mem­ber what they spent on petrol in the past month?

The old school way of tracking spend­ing is to carry around a notebook for a month or two. Write down ev­ery pur­chase – park­ing, cof­fee, school sta­tionery etc. Then add in any bill pay­ments to get the full spend­ing pic­ture. Lit­tle things like ice creams and park­ing re­ally add up, so we need to make sure we in­clude them.

Some banks of­fer a tool that links au­to­mat­i­cally with our dig­i­tal bank­ing. An­other way to do this is to down­load a smart­phone app that does the job – there are sev­eral de­signed to help us track our spend­ing on the go, such as Wally, Spend­ing Tracker or Spend To­day. Do­ing a web search for 'spend­ing di­ary' also turns up lots of links to re­sources and tips.

When we track our ex­penses, we need to be ready for some sur­prises. But wher­ever the leaks are, that's where our op­por­tu­ni­ties are too. We're able to see where our money is flow­ing and make some choices about where we want it to go in­stead – to­wards hol­i­days, an emer­gency fund, ed­u­ca­tion, and re­tire­ment.

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