Of course budgets can be very useful, it’s just that when created they usually require a great deal of self discipline. The simple fact that you need a budget to get out of financial trouble is exhibit number one that self-discipline was probably absent in the first place. Pinning your financial dreams on the assumption that you’re going to be “good” next month generally leads to devastatingly poor results. Your personal finances are too important to risk with little more than hope and optimism.
Just incase you think that the previously absent self discipline will save you from financial flagrancy tomorrow, take this brief exercise:
Question: How much self-discipline do you have today?
Answer: Exactly the same amount as you’ll have tomorrow.
In his book “How to live within your means and still finance your dreams”, Robert Ortalda suggests that to understand the discipline required to maintain a budget; “you have to think about garages”. He says, and I agree, there are generally two types of people when it comes to garages. There are those that have clean and tidy garages, and those that have messy ones.
The clean ones are maintained by an exclusive group of garage zealots. They have peg-boards on the walls with pictures of the tools and things that should be hanging there. You never get to see the picture of the thing because the thing that should be hanging there always is. Jam jars are screwed into lids that are nailed to shelves. These contain every sort of nut, screw, nail, grommet and widget any self-respecting handy-person could ever need. Everything has a place and everything is in its place. And may whatever god you believe in help you if you move anything or don’t put something back.
The other type of garage is always full of mess. Things go in there and then they don’t come out again. The car has trouble fitting in. It’s full of dust and empty paint tins. The people who have these kinds of garages have a mantra they keep chanting over and over again “One day I’m gunna clean out the garage”.
Finally that day eventually does arrive and after several mini-skips, the garage is beautifully clean. It’s so good its just missing the peg-board with the pictures. But after a while is gets messier and messier and finally it’s back to the way it was. Then the mantra begins again “one day I’m gunna clean the garage”
The people who own the first type of garage demonstrate a tremendous amount of self-discipline. They have to. It takes a lot of thought and a lot of work to keep a garage that clean. Daily maintenance – sweeping, tidying, putting things back on the pegboard after you finish with it – not leaving it where you were working.
For a budget to work, it’s got to be designed with the second type of person in mind. Those who sporadically like to clean out the mess.
If you think it’s easier to tweak the little expenses and do it week after week to save twenty or thirty dollars, then go ahead and knock yourself out. I reckon it’s a lot easier to just to do one or two biggies and enjoy the savings over and over without the effort. Why scrimp on essentials that call out to you every time you shop when you can just scrap the cable TV and save heaps. These are ‘structural’ changes to the way you previously spent your money. Doing things this way makes daily self-discipline significantly less important. Kind of like ripping off a band-aid – do it fast and do it once. Or if you’re into it, you can go the other way and slowly take it off over and over again, day after day of band-aid ripping.
Sure the once off clean-out can cause pain. I know you can’t watch re-runs of Seinfeld and keep up with the latest on Fashion TV when you dump cable but when you get your financial house in order you can always put it back on. When you do you might find that Jerry has come out of retirement and you can watch new episodes – oh but wait, you’ve already seen those on free to air!
Showing posts with label budgeting. Show all posts
Showing posts with label budgeting. Show all posts
Wednesday, October 14, 2009
Sunday, July 12, 2009
Be climatesmart
Over the last several quarters we’ve been getting electricity bills that are enough to make you cry. Despite our best efforts, we’ve had little luck in reducing our electricity costs. We’ve installed energy saver light globes in all our lights; turned off the second fridge in the office. Reduced the amount off time the pool filter runs but we still can’t seem to make any significant impact in amount of each bill.
Recently we had an electrician come and conduct and audit out as part of the Queensland Government’s “climate smart home service”. He checked a number of things as well as looking at previous electricity bills. For me however, the most significant aspect of the audit was the provision of a wireless energy monitor. It shows how much energy we’re using in a very meaningful way – in dollars and cents.
The monitor tells you how many cents per hour its costing you to run your house based on the electricity you use. When we’re not doing anything significant with electricity it shows a cost of around 12 to 15 cents per hour. Turn an electric kettle on and that goes to 55 cents per hour. Electric irons, hair driers, clothes driers, anything that uses an element to create heat really adds up.
Now we already knew this and always tried to keep the use of such things to a minimum. But when you can see the meter ticking on the energy monitor it becomes very motivating to turn the offending item off and in some cases not to use it in the first place.
It’s also helped my boys understand the cost of electricity and they’ve really got on board and are trying to keep the use of electrical appliances to a minimum. My youngest boy rang me the other day to tell me the monitor was showing an increase from 18 cents to 57 cents and he couldn’t work out why. He said he wasn’t using anything that he could account for. We soon figured out it was the instant electric water heater in the office switching on as its store off water was being re-heated. We’ve yet to figure out how we can reduce the cost of this, we’re experimenting with the temperature at present.
If you know any money saving tips through more efficient use of electricity please don’t hesitate to share them with us. We’ll be glad to put them into effect. In the meantime, I urge you to have an audit arranged for your own home. In the interest of saving some money and reducing your carbon footprint go to climatesmarthome
Recently we had an electrician come and conduct and audit out as part of the Queensland Government’s “climate smart home service”. He checked a number of things as well as looking at previous electricity bills. For me however, the most significant aspect of the audit was the provision of a wireless energy monitor. It shows how much energy we’re using in a very meaningful way – in dollars and cents.
The monitor tells you how many cents per hour its costing you to run your house based on the electricity you use. When we’re not doing anything significant with electricity it shows a cost of around 12 to 15 cents per hour. Turn an electric kettle on and that goes to 55 cents per hour. Electric irons, hair driers, clothes driers, anything that uses an element to create heat really adds up.
Now we already knew this and always tried to keep the use of such things to a minimum. But when you can see the meter ticking on the energy monitor it becomes very motivating to turn the offending item off and in some cases not to use it in the first place.
It’s also helped my boys understand the cost of electricity and they’ve really got on board and are trying to keep the use of electrical appliances to a minimum. My youngest boy rang me the other day to tell me the monitor was showing an increase from 18 cents to 57 cents and he couldn’t work out why. He said he wasn’t using anything that he could account for. We soon figured out it was the instant electric water heater in the office switching on as its store off water was being re-heated. We’ve yet to figure out how we can reduce the cost of this, we’re experimenting with the temperature at present.
If you know any money saving tips through more efficient use of electricity please don’t hesitate to share them with us. We’ll be glad to put them into effect. In the meantime, I urge you to have an audit arranged for your own home. In the interest of saving some money and reducing your carbon footprint go to climatesmarthome
Thursday, May 14, 2009
FHOG extension a chance to boost savings
The Federal Government’s extension of the boost to the FIRST-HOME Buyers Grant will give would-be first home-owners a chance to get their finances in order before applying for a loan.
Under the scheme as it was, the boost to the grant was due to cease on June 30, 2009. The Federal Government will extend the boost to the first home-owners grant by six months to December 31. This additional six months extension, announced in last night’s federal budget, will allow borrowers to build their savings to meet the current, more stringent requirements of lenders.
Since October 2008, first home-buyers have received an extra $7,000 when purchasing an established home and an extra $14,000 for new homes, on top of the $7,000 provided under the first home owners scheme. The boosted grants were due to end on June 30 but will now apply for homes purchased on or before September 30 this year. The extra grants will then be phased down to an additional $3,500 for established homes and $7,000 for new homes up to December 31, 2009. After that date the scheme will continues in its original form providing $7000 to eligible persons to purchase either a new or existing home.
Under the scheme as it was, the boost to the grant was due to cease on June 30, 2009. The Federal Government will extend the boost to the first home-owners grant by six months to December 31. This additional six months extension, announced in last night’s federal budget, will allow borrowers to build their savings to meet the current, more stringent requirements of lenders.
The boosted grants were due to end on June 30 but will now apply for homes purchased on or before September 30 this year.
Since October 2008, first home-buyers have received an extra $7,000 when purchasing an established home and an extra $14,000 for new homes, on top of the $7,000 provided under the first home owners scheme. The boosted grants were due to end on June 30 but will now apply for homes purchased on or before September 30 this year. The extra grants will then be phased down to an additional $3,500 for established homes and $7,000 for new homes up to December 31, 2009. After that date the scheme will continues in its original form providing $7000 to eligible persons to purchase either a new or existing home.
Thursday, April 23, 2009
You have the power to save
I was paying my electricity bill last week and happened across a person instead of the usual machine. In the course of paying my account they noticed I was paying a little extra each week ($0.69) so I could access some renewable 'green' energy. I was told for another 0.31 cents extra I could qualify for additional green power and get one month's electricity credited back to my account.
Check out your current electricity account and see how much you are paying. If this sounds interesting to you simply switch to Origin for your household electricity and natural gas and they'll reward you with a month off from paying your electricity bill.
They calculate the total amount of electricity you used over the previous 12 months and divide it by 12. This amount will then be credited to your electricity bill after your 12 month qualifying period so long as you pay your accounts by the due date or advise them when you will pay if you can't make the due date (this happens to all of us from time to time).
Why not visit www.originenergy.com.au/1230/One-months-FREE and see if this is something you could use.
Do you know any money saving options for other everyday expenses?
Check out your current electricity account and see how much you are paying. If this sounds interesting to you simply switch to Origin for your household electricity and natural gas and they'll reward you with a month off from paying your electricity bill.
They calculate the total amount of electricity you used over the previous 12 months and divide it by 12. This amount will then be credited to your electricity bill after your 12 month qualifying period so long as you pay your accounts by the due date or advise them when you will pay if you can't make the due date (this happens to all of us from time to time).
Why not visit www.originenergy.com.au/1230/One-months-FREE and see if this is something you could use.
Do you know any money saving options for other everyday expenses?
Thursday, October 2, 2008
First home saver account facts
- Only first home buyers can apply.
- You must be between 18 and 65.
- Limit one account per customer.
- You must save $1000 a year to get the 17 per cent government contribution.
- You can't take the money out until you buy a home at least four years down the track.
- If you change your mind about buying, the money goes into your super fund.
- Earnings are taxed at 15 per cent.
Wednesday, October 1, 2008
Extra money towards your first home
The burden of saving for your first home has never been greater but, for those saving to purchase in a few years time, the job might be just a little bit easier. From today the federal government’s First Home Saver accounts become available.
If you're saving to buy or build your first home then a first home saver account may suit you. The accounts are complicated by a few rules and regulations but in essence they allow you to attract a contribution from government of up to $850 a year and the tax on the interest you earn is capped at 15 per cent (the same as your superannuation).The overall account balance will be limited to $75,000 and a minimum of fours years needs to pass before the money can be withdrawn to buy a home. The real bonus is that operating one of these accounts doesn’t disqualify your eligibility for the First Home Owners Grant Scheme (FHOG).
To earn the maximum government contribution you need to have saved $5000.00 per year yourself. The contribution is calculated as 17 per cent of the amount saved in each year (17% of $5000.00 = $850.00). If you can achieve this for 4 years you will have $23,400.00 saved which includes the government contribution plus any interest you have earned (less some tax at the lower rate). Add to this the FHOG of $7,000.00 and you’ve got yourself a tidy deposit of just over $30,000.00.
This represents a 6 per cent deposit on a home with a price of $500,000. With the recent exemptions from government stamp duty on homes up to this amount, $30,000.00 will go a long way towards getting you into your first home.
If you're saving to buy or build your first home then a first home saver account may suit you. The accounts are complicated by a few rules and regulations but in essence they allow you to attract a contribution from government of up to $850 a year and the tax on the interest you earn is capped at 15 per cent (the same as your superannuation).The overall account balance will be limited to $75,000 and a minimum of fours years needs to pass before the money can be withdrawn to buy a home. The real bonus is that operating one of these accounts doesn’t disqualify your eligibility for the First Home Owners Grant Scheme (FHOG).
To earn the maximum government contribution you need to have saved $5000.00 per year yourself. The contribution is calculated as 17 per cent of the amount saved in each year (17% of $5000.00 = $850.00). If you can achieve this for 4 years you will have $23,400.00 saved which includes the government contribution plus any interest you have earned (less some tax at the lower rate). Add to this the FHOG of $7,000.00 and you’ve got yourself a tidy deposit of just over $30,000.00.
This represents a 6 per cent deposit on a home with a price of $500,000. With the recent exemptions from government stamp duty on homes up to this amount, $30,000.00 will go a long way towards getting you into your first home.
Monday, July 28, 2008
How much can you borrow?
If you’re like most of us, buying a home is the biggest investment you will ever make. Since very few people are able pay cash, obtaining a loan is the foundation of home ownership. How much you borrow depends on a number of factors:
- Your income and expenses
- Estimated repayments
- Serviceability
- Assets and liabilities
- Your lifestyle
- Your deposit
Before you start looking for a home, think carefully about your spending habits. Compare expenses and income by preparing a budget noting all major upcoming expenses such as replacing your car, holidays, school fees, etc. Knowing exactly how much you spend each week is essential in determining how much you can afford to borrow. Having a realistic picture of your finances will avoid costly knock-backs from a potential lender.
Avoid being rejected for a loan. Lenders frequently trade credit information. A decision to decline a loan appears on you credit report and can harm your chances of obtaining a loan with another lender.
When deciding how much you can borrow, lenders will look at your serviceability - whether you can afford the repayments over the life of the loan, not just while interest rates are low. To do this, they use a benchmark figure that is usually several percentage points higher than the prevailing variable rate. Your repayments will also be assessed against your income. In most cases, the upper limit for minimum repayments is about 35 per cent of pre-tax income (or about 30 per cent of combined income for joint borrowers). Some lenders may use your uncommitted income - what is left over after all household expenses - to determine your repayment capacity.
In most cases, to be eligible for a loan you must own more than you owe. Lenders will look carefully at your existing assets and liabilities. Assets include furniture, jewellery, car, savings and investments that you may have built up over the years. Lenders will assess your credit risk to determine whether you are likely to default on the loan. Factors like your occupation, employment history, where you live and past loans are used to build a credit profile. Your credit risk can influence how much you can borrow.
Friday, July 25, 2008
Planning a budget
We have reached a point where we buy on impulse with no thoughts to the consequences. In order to reverse this trend we need to become more responsible with our spending habits. One of the best tools to help an individual accomplish this is the personal budget. Many people do not see the value in creating a budget as they simply have no desire to restrict their spending habits. However, budgeting is not about “financial dieting” but rather it is a decision-making process. While it is about numbers it is not about accounting. It is about making decisions in your life and choosing specific plans to make your goals a reality.
The object of a good budget is to make your money help you reach your goals, not to force you to conform to rigid rules. Don't be discouraged if your plan doesn't work for you right away. You may have to revise it several times until it fits your wants and needs.
The object of a good budget is to make your money help you reach your goals, not to force you to conform to rigid rules. Don't be discouraged if your plan doesn't work for you right away. You may have to revise it several times until it fits your wants and needs.
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