Being in Control of Your Household Spending
The NZ economy is currently facing a period of high uncertainty and high inflation. With the cost of living increasing, Rural Accountants would like to share some basic and important steps often missed when creating a household budget.
1) Begin by Setting your Goals
A budget without connection to what is personally important to you easily becomes frustrating and meaningless. Increase the likelihood of successfully sticking to your budget by sitting down and clarifying on paper your long, medium and short term goals. Don’t be discouraged if your short term goals are simply making it through your current situation.
2) Analyse and Prioritise Current Spending
Place your current spending into the following 4 categories. This should really clarify what is important to you and bring awareness to any weaknesses or wastage in current spending.
Survival Needs - Basic Household Expenses
Critical Wants - These include things not necessary for survival but that you are not likely to want to give up. For example, broadband and cellular plans, fuel and vehicle expenses, even medical care or multi vitamins.
Lifestyle Choices - The bulk of things may go in here such as gym memberships, eating out, fashion choices, movies, media subscriptions and buying gifts.
Long Term Wants - This includes savings or working towards wants or needs for the future. For example, saving to put your child through education or for a vacation to visit family. Whilst having these expenses can be hard in the short term, long term they bring big rewards and cutting them out can seem a depressing concept.
3) Add Income and Subtract Expenses
How much income is going into each category above? What is left over and what do you wish to spend it on?
This is the stage many people start their budget. Take advantage of the huge number of worksheets and tools available on the web to help you from this point on.
Try to build up a ‘backup’ fund to pay for your survival and critical wants for 6 months ‘just in case’. While this may seem a doomsday approach, the reduction in stress such a fund will bring can really add to your overall wellbeing.
Often household spending and business spending can overlap and create confusion. Remember Rural Accountants offer a wide range of services, including business advice and are here to help in anyway we can. Feel free to call for an obligation free chat. 0800 308 5015