Finance Your Budget Falling short of your household budget? These tips will help
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Falling short of your household budget? These tips will help

Drawing up a budget has many benefits, so it's worth persevering. Photo: TND
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Are you ready to break up with your budget?

You’ve tried, really you have, but no matter what method you have used you always seem to be way off the mark when it comes to estimated spending versus your actual spending.

You’re wondering what is the point and whether it is worth your time and effort.

But don’t worry. It often takes time to refine your budget and get your projections to closely reflect reality, according to Chronos Private partner and principal adviser Chris Giaouris.

“If your budgeting is incorrect, that doesn’t mean that you’re doing the wrong thing per se; this stuff will evolve over time,” he said.

“Getting the numbers to match is definitely not the only reason why you do the budgeting – it’s just as important to actually know what is happening in reality.”

Why a budget is worth the effort

Having a household budget is obviously beneficial in the short term, but having a good grasp of what your lifestyle actually costs can also make it easier to get a bank loan or plan for retirement.

“If I am running cash-flow models for people and trying to help them understand when they might be able to retire or when they might be able to pay off their home loan, the biggest and most difficult variable for me is that lifestyle expenses number,” Mr Giaouris said.

“If you know how much you need to pay the bills and have the lifestyle you want, then I can very accurately tell you how much money you need to retire on.

“But if you ask the question how much do I need to retire on without that added context of what your life might cost you, it’s literally how long is a piece of string.”

The things we often miss out

Mr Giaouris said annual expenses, cash expenditure and forgetting to include saving as a planned expense – if you have enough to save – can commonly trip up people as they try and stick to a budget.

Although it can be cheaper to pay for things like private health or car insurance on an annual basis, you can still divide that cost into a monthly expense for the purposes of your budget.

This will reduce the likelihood of having insufficient funds in your account when these are due to be paid.

It’s also important to keep track of cash spending on things like coffees – and worth making saving a non-negotiable line item in your budget.

Setting up an automatic transfer into your savings account the day after pay day is not a bad way to go.

Unexpected expenses like gifts, vet bills or extra school costs can also push your budget off course, but there are ways to plan for these unforeseen expenses.

Mr Giaouris suggested going through your bank statements for the last year to get a guiding figure for each spending category, then revisiting those numbers monthly to compare your estimates to reality, and then revising your budget accordingly.

Mobile phone apps such as Goodbudget and Pocketbook can also help you track your spending, and some bank apps can automatically divide your expenses into categories like groceries, eating out and transport.

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