Home Budgeting

Spending Habits

How do you finance your spending habits? One of the best things that we ever did was allocate the first bit of our pay to our home loan. From your fortnightly pay, subtract the fortnightly amount of your mortgage. Is your home loan is one that allows you to make fortnightly repayments? If not, consider changing. It effectively means you pay an extra month's payment every year. Ask your lender if you can change. Make sure you ask if it will cost to change. Next, can you make extra repayments without penalty? Consider rounding your repayment up to the next $100. If this is too much of a struggle, try to the next $50.

What this means is that you are saving money EVERY SINGLE FORTNIGHT and you have effectively paid yourself first every time you get paid. You have met your mortgage obligation and then added a little extra. So there you go, you're already ahead, saving money. When you have done this, celebrate it. You'd be surprised at how many people just cannot take this step. Adding extra repayments to your mortgage saves thousands in interest and can cut years of the life of your loan. If your mortgage product is fixed and you cannot make any extra repayments, stay with me, there are still ways to get ahead. Read on, we're going to save you a packet.

So now you've paid your mortgage plus a little extra. Next is everyone's nemesis, BILLS. Let me say that I hate bills, but we have NEVER been charged a fee for paying a late bill. Nor have we ever struggled to find money for bills. There is a way to achieve this. Go thru your bills for the past 12 months and add them all up. A great tip here is to round EVERY SINGLE BILL UP. If your phone bills last year came to $1 855, make it $1 900. If your life insurance premiums last year were $425, make it $450 and so on. Once you get a total at the end, divide it by the number of pays. If you get paid fortnightly divide by 26. If you get paid monthly obviously it'll be 12. You can add really whatever you like into bill money. To help you out a little here's a list to get you started.

• Phone bills, electricity & water. We'll get to phone bills later...I have an easy way to save money here!
• Car rego, CTP & comprehensive insurance. You can also add car servicing here. Work out last year's round it up and add $200 to be safe.
• Home & Contents insurance
• Life insurance
• Income protection insurance.
• Council rates
• Private health insurance.
• Pre-school / school fees

Recently our family added petrol to our bill money, to cope with the rising cost of fuel. Can you work out how often you refuel your car/s? How many litres per tank? Average it out per fortnight and add it to your bill money. You don't have to do this, but it's just an idea.

Add it all up and divide by 26 (fortnights). This is the amount of money you need to put aside every fortnight to pay your bills. The balance is what you have to live on. If you're currently in the red or left with very few dollars left you obviously need to cut something back. Do you have Pay TV? Do you pay for your teenagers' mobile phones? Something has to give here. It's obviously time to shop around and cut some costs. I understand the feeling you have in your stomach right now, especially about the Pay TV. How is this going to go down with the rest of the family? But if you're paying $70 plus per month for TV, can you justify it? If you really can't live without it, have you heard of SELECTV - Australia's Low Cost Digital Satellite Pay TV service . In some cases it might be half of what you're paying now. You'd be crazy not to check them out.

Here's another great tip. If you receive a fortnightly Family Allowance payment, add this to your "Bill Money". Now read this carefully. If you have a pre-school child in childcare, I'd suggest using this as extra bill money. That is, if you have allocated $400 per fortnight from your pay for bills, it's now $400 + Family Allowance. You don't need me to tell you that child care is expensive, so the extra will help. If your kids are at school, decide whether you need the Family Allowance to be extra bill money or can be included in your bill money, that is. I'll explain...if you need $400 per fortnight for bills and you get $100 from Family Allowance, then maybe you could just add the $300 from your pay and include the $100 from Family Allowance. This will give you an extra $100 per fortnight to use for other purposes. 

So now that you've allocated money for bills, what you have left is yours. This has to buy groceries, coffee (every parent needs good coffee, trust me!!), school costs, "Mum, can we please have an ice cream", birthday presents, the list goes on. If you're struggling here, you need to start cutting back somewhere. I would strongly recommend not ditching the extra home loan payment yet.

Do you like going out for coffee? There's no reason to stop doing this, but at $3 - $4 a cup it quickly adds up. Have you thought of buying an inexpensive espresso machine? We have one and it gets used every single day. I would love to know how many $3 - $4 cups of coffee have come out of it. I can guarantee it's well more than the cost of the machine. Goto our ONLINE SHOPPING page and have a browse.  Try DirectDeals as they often have good quality coffee machines at a good price.         

Bear in mind, the more expensive brands aren't always the best. For example, some of the Sunbeam machines are getting a really good write-up in Choice magazine lately.

Buying lunch is a huge waste of money. No problems as a treat every now and then, particularly if you manage to budget well. But taking your lunch to work / school / uni can save thousands per year. Also consider taking a water bottle too. It's healthier and cheaper!

When you start out on your budget cost cutting exercise, be tough with yourself so that as you go on, you'll get to know when you can let the purse strings go a little. We also have some great ideas on our Kid's Craft Ideas page which are inexpensive / free activites to do with your kids at home.

If you find that you're getting through the fortnight with some cash left over you should be really proud of yourself. The 1st week you get through, treat yourself. Buy some champagne and importantly, tell me how you went. I'd love to hear how you're going.

As an ongoing guide to managing your money, it is worthwhile investing in some money management software, such as MS Money (which can be purchased through iBuy.com.au.) Click Here to search iBuy  We have used MS Money for years as it allows you to track expenses in as much detail as you choose. Then at the end of the year you can look at where you're wasting money. It really is a great tool. The other good thing about it is that it will help you track your bill money. For example, if you have a mortgage offset account as we do, we might have, say $2 000 sitting in there. But realistically, only $400 is our cash. $1 600 is Bill Money just sitting there waiting for some bills to pop in. It's saving us a fortune in interest charges. We set our MS Money program up to show "Bill Money" as a separate account. So it will show a balance of $1 600 and our "Transaction Account" shows $400.

Another money management software product comes from an Australian company called "live-it-up". They offer a fully guaranteed money management and budget software product to help track your finances. Click here NOW to get a free demo of this great product!!

For Mac users, goto the Apple website, select "Home" under "Sofware", then select "Accounting and Finance". iBank from IGG Software is pretty good

I need to stress that if your finances are in a mess, then doing this will take some effort when you first start. After a month or two you will see how good it is. When I reorganised the finances of a friend recently he called me after about 6 weeks and said he couldn't believe how much cash he had left over. Admittedly, he did not have a lot of credit card debt. If this is you, your job will be harder but success will be sweeter when you pay it off!