By Jason Fittler
An old saying which has always proven to be true is, “People never plan to fail they merely fail to plan.” With the New Year now upon us there are many of you who have made New Year resolutions, most will never follow through on these, as you most likely have failed to plan how you are going to achieve this result.
First things first, hang tough... determine your resolution, your plan. Then, tell as many people as you can your New Years financial resolution. The more people you tell the more committed you will become to achieving the resolution. Next; set about planning how you are going to achieve this goal and finally take action.
Improve your budgeting
Below I have attached a very simple budget spread sheet, this is not meant to be a complete all encompassing budget spread sheet. I have made it very simple for one main reason - to make sure you take the time to complete it.
Click here to download Simple Budget Spread Sheet
I find the biggest problem with people preparing a budget is that it gets all to hard, this one is designed to get you started on achieving you New Years resolution of better money management straight away. If you would like a more detailed analysis, then give us a call and we can organize this for you.
First the instructions
1. Only put figures in the yellow sections.
2. Get a copy of the following bills: Rates notice, insurance notice, Electricity, Telephone, Internet, Loan repayments, Pay TV, Rent, other regular bills.
3. Get a copy of your most recent pay slip and details of any other income.
4. In the yellow box under income put in your net pay details, if you get paid weekly only fill out the weekly section, if fortnightly only fill out the fortnightly section.
5. In the Yellow box under expenses do as above for your expenses. Please note that if you have multiple expenses under the same heading such as loans, add all of the monthly repayments together and enter as one payment.
6. By now you should see figures in the blue section on the Spread Sheet this is OK.
7. Take your electricity bill, these normally are billed quarterly, look at the date on the bill and enter this in the yellow section of the spread sheet under electricity. As this is a quarterly bill you will need to put the same figure in four times to correspond to the quarters you pay these bills.
8. Rates - do the same as for the electricity bill but this will be charged half yearly. Make sure you only have two entries under Rates.
9. Insurance – this would normally be an annual payment take your last bill and put the amount in the month you paid it last year.
10. Repairs – these are any one of repairs which you know you will have in the next 12 months, such as car service, replace a fence etc. If you have any of these place the expense in under repairs.
That’s it. Now you should have a very basic cash flow statement, in the very bottom box it will show your net cash flow for the month, if positive it is a surplus if negative it means that you are spending more than you make.
What about entertainment and general living expenses? I have only covered fixed costs, these are expenses which you have to pay. The rest are a variable expense, which means that these are ones which you can reduce if you want to. Here is where you can improve your financial position, you do this by reducing your variable expenses or putting this money to better use. For example paying down loans, paying out credit cards or investing in growth assets.
If you have a surplus net cash flow each month but no extra cash at the end of the year then I would say you are wasting a lot of money each year, with a little care and planning you could put this money to better use.
This time next year you will be either wondering where the money has gone or be sitting down and reviewing your 2010 budget.
What’s your plan?
Until next week.