How To Set Up Your 2017 Budget Like A Champ
What with the holidays approaching, office parties to celebrate and a Santa’s sack worth of presents to give out, December’s proving itself to be one hella expensive month. We gathered some life coaching from a money expert to help soothe the blow of a 2017 debt hangover.
We all know the festive period leads to a teensy bit of extra spending (and extra drinking). This often means we’re left dealing with the repercussions in the new year – when we’re busy trying to start new fitness habits and book clubs. So in order to avoid starting 2017 in spending salvation, it’s time to do a little money x-ray on ourselves and set up an achievable budget for the year ahead.
If you’re wondering where to even begin with all that, we’ve got the low down from Bessie Hassan, money expert over at finder.com.au, on how to plan a new budget, a new cash flow and a new mindset for 2017.
#1 Review your financial profile
Let’s start with the simplest course of action: actually figuring out your current financial position. Firstly, Bessie suggests jotting down your net salary and total income, “including any investment income that you receive or any government grants or allowances.”
Next up are household expenses. Things like rent, utilities and any ongoing financial commitments like loan repayments. “Remember to factor in costs for leisure and entertainment such as eating out, music festivals or even money spent on a Sunday sesh,” she says. Make sure you’re getting absolutely everything down too: “The phrase ‘don’t sweat the small stuff’ doesn’t really hold true when it comes to budgeting, so think of every possible cost – no matter how small.”
By the way, have you checked out your credit score yet? Bessie suggests this preliminary stage is a good time to get your hands on your credit file and credit score so you can get a proper feel for your repayment history, your financial activity, and your risk profile. “Sure, conducting a financial audit might not be the most exciting thought, but it will be worth it in the long run,” she says.
#2 Find ways to revamp your current position
This is all about self-awareness: if we know where our money is going and when, we might be able to make actionable changes to help with budgeting and saving. As Bessie puts it, “having this knowledge under your belt may prompt you to adjust your financial behaviour and your decision-making for the better.”
For example, it might help you realise ways of earning a little extra cash on the side. Simple things like renting out your spare room or deciding to switch to a different internet provider if they offer better value for money – just take a look around, it’ll help your financial profile in the long run.
#3 Learn the art of personal sacrifice
We know, this isn’t exactly what you want to hear, but as Bessie explains, “to budget well you need to make some personal sacrifices.”
“Whether it’s eating out less, saying ‘no’ to compulsive online splurges or taking public transport instead of a taxi or Uber, there are plenty of lifestyle changes you can implement in order to boost your savings and help you stick to your budget plan.”
#4 Start budgeting (with the right resources)
Okay, we’ve done the hard yards. Now it’s time for the good stuff: drawing up your budget. If you take into consideration the small sacrifices and changes we’ve made, you can now list your total income and assets, household and daily expenses, debts (if any), and forecast an amount you’re likely to spend on each item. “If possible, these amounts should be a conservative estimate,” says Bessie, meaning you should overestimate your expenses and underestimate your income.
To set your budget, Bessie recommends using a budget calculator like this one, or speaking to an expert (like an accountant or a financial planner) to help you out. “Remember to assign 5 to 10% of your total savings to a ‘miscellaneous basket’ which you can pull from for any unexpected costs you may face, or for a ‘rainy day,'” Bessie advises.
She also recommends setting yourself a timeframe for your budget, “whether it’s for 12 months, 24 months or even longer into the future, as this will also help you with your financial goals.”
Overall, Bessie says it takes patience and discipline to budget, so try your best to stick it out. “It may not always come easy, but remember to sit tight and maintain a positive frame of mind.”
“Effective budgeting will improve your quality of life by helping you to save for big expenses and by making it easier to service ongoing debt, which will provide you with greater financial security in the long run.”
Bessie Hassan is the Money Expert at finder.com.au and a respected media commentator who regularly appears on radio, TV, and throughout digital publications, sharing her best money-saving hacks and advice.