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Pampering the future you – 8 tips for budget planning

Budget planning need not be a painful task. We all have idealistic goals for how much money we would like to have, the amount we’d like to save, and even the thought of the interest you could earn is probably giving you fiscal butterflies.

But when it comes to the nitty gritty of dividing your salary and rationing it to various expenses, it can be boring at the best of times and downright scary at its worst.

Think of budget planning less like a finance straightjacket and more like a cash donation to tomorrow’s you. Become your future self’s benefactor – the wealthy distant uncle with a large inheritance, if you will – and dole out hard-earned cash for a wealthy tomorrow.

Here are a few tips to put the ‘bud’ in budget planning:

1. Your wallet’s backbone

A budget should be your financial spine – a framework both rigid and flexible. It should show enough discipline to ensure regular savings yet allow for unpredictable expenses, such as an unexpected bill.

2. Set goals

Ascribe financial goals to your budget – that way you can see your money grow and know where you’re headed.

3. Do the maths on loans

If a loan is required for a purchase, calculate how much interest will need to be repaid throughout the life of the loan. If the repayments plus additional interest rates cannot be comfortably integrated into your budget, consider sourcing finance by other means.

4. Count the extras

Determine how much money is needed for any loans or infrequent bills, such as gas, water or insurance (which may be invoiced quarterly). Your budget should factor these in so when they appear they do not throw your budget out of balance.  

5. Think big!

Saving one or two dollars may not seem significant in the short-term but if those spending habits equate to $100 per month, that would mean $1200 annually, a figure far more attractive if it were bundled together with your savings.

6. Spoil yourself …

Deprivation shouldn’t be the means to your savings. Allocate your purchases into ‘necessities’ and ‘desires’. When you are faced with an unnecessary purchase, consider whether your desire is justified by its value. Consider your decisions before the purchase and you will cut back on frivolous or impulse spending. 

7. … within reason!

For those occasions where you feel inclined to splurge (at the pub or shopping centre, for example), withdraw money beforehand and leave your debit or credit card at home.

8. Do a budget

For an excellent budget planner, download the budget template provided by the Australian Government at understandingmoney.gov.au. This excel spreadsheet allows you to input amounts and it will automatically calculate available savings.

Now sit back and relax, while refraining from spending outside of your budget’s means. The joy involved in watching your savings grow and knowing you are essentially paying a salary to yourself is one of the best kept secrets of budget planning.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Friday, July 09, 2010

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