The Federal Budget was handed down in May and in it we got an idea of where the country is at financially. Budgets are great for that: they provide a snapshot of where our strengths and weaknesses lie.
In terms of your personal finances, a budget is essential because it gives you control over your money. Without one, you could find yourself in hot water.
Do you need a budget? Here are a few ideas to get you started.
1. Create an income-and-expense document
Listing how much money you are bringing in and spending each month will immediately identify any problem areas. You can use a spreadsheet program, a notebook or one of the many money-tracking apps that are available. Not only will this document give you a snapshot of your financial position, it will also capture historical data. If you find you’re coming up short in the third week of every month, this tracking sheet will tell you where the problem lies.
2. Pay down bad debt
If you’ve borrowed money to pay for a holiday, car, clothes or gadgets, especially using high-interest credit or store cards, it’s important to pay off these items first. These things are bad debts. Good debt includes purchasing things like income-producing property that will increase in value over time.
3. Plan ahead
As a property investor you know that there are foreseeable expenditures throughout the year, including things like maintenance, repairs or even planning for possible vacancies around end-of-lease periods. Take these things into account and plan ahead by creating a buffer or surplus.
4. Have a buffer
Having savings is important for handling the challenges that life throws our way. If you have an offset account attached to your mortgage, use it to keep extra cash. Not only is it easy to get your hands on but it may also keep the principal amount of your loan down, reducing your interest repayments in the process.