BudgetMama

Don’t you find nothing brings our finances closer to the front of our mind more than Christmas? A Popular topic of conversation around September is, ‘Oh my gosh, it’s nearly Christmas already!!!!’

As we begin to see signs appear saying ‘Layby Now for Christmas’ and ‘Taking Christmas Orders Now’ we can’t help but begin to get a little stressed, especially if we are already living that pay cheque to pay cheque lifestyle already.

Now there are all sorts of ways to relieve that stress, but it’s a little late for me to get into that only two days before Christmas! But, what I would like to talk about today is preparing for the year ahead, as with Christmas upon us and the New Year looming around the corner there is no better time than now to start thinking about your budget.

We’ve heard a lot of doom and gloom over the past year about corporate collapses, mortgage crisis, rising unemployment and the global economic downturn, however, it is possible to ride through these difficult times by taking one evening to really have an honest look at our spending habits and see where we can make improvements.

Take some time out as early in the New Year as possible to pull out old bills and note the pattern of spending they represent. For example, your power bill may reflect much higher usage at certain times of the year due to heating or air conditioning. Once you have identified this pattern it will be much easier to prepare for it so that paying those higher bills doesn’t cause undue pain in the year ahead.

You may be wondering how knowing you’ve got big bills coming will change the pain they cause. Well, it’s really as simple as calculating a figure to set aside out of each pay cycle to put towards those future bills that will make your life so much easier.

Preparing for future dated expenses is one of the most important aspects of planning and budgeting successfully. It’s easy to feel that some weeks you have little or no bills to pay and therefore have more money to indulge in other areas, however this is really an illusion because on the weeks you do have a big bill arrive you will really feel the strain on your budget trying to cover it out of one pay cheque. In fact, many people I talk to about budgeting tell me that they feel they are in a constant catch up mode because having to pay a big bill meant they got behind in other commitments and so begins the cycle of stress trying to make ends meet.

So, get a bit savvy with your finances. Look over 2009 and work out how much you actually spent on bills over the entire year. Divide that figure by 52 and you will have a weekly figure to set aside. Set that money aside somewhere separate from your regular everyday bank account, it could be a money jar, but a free online bank account is ideal.

If this concept is entirely new to you and you have absolutely no funds set aside for bills then you can expect to still have weeks where you will need to top up your jar/bank account to cover a bill, but don’t give in, persevere and stick to that regular set aside figure, and within a short time you will find that your household budget will be so much more manageable. In fact, you will even find that you have more money to indulge on other things than you did before as you will be breaking out of that stressful lifestyle known as ‘robbing Peter to pay Paul’ and replacing it with a budget that you are in control of, rather than the other way round.

Bring on 2010!

As with most things, beauty is in the eye of the beholder and the best savings accounts are determined in the same way.

If you are a generation X or Y than chances are you prefer to do most of your banking online. Online banking offers the convenience of instant and private access, no standing in queues waiting to be served, everything is laid out before you on your home computer screen and this makes it much easier for many of us to manage our funds. Combine that with an abundance of ATM’s, Bpay and EFTPOS facilities just about everywhere and these days there rarely seems a reason to enter a branch at all.

Yet despite this self managed approach to banking many of us continue to pay monthly account keeping fee’s to banks for services that we no longer use. The solution is to find a bank that can provide you with an account that only offers online access in return for no fee’s and higher interest.

There are many such accounts out there; however, some have restricted access or conditional balances and withdrawal limits. So what should you look for when determining the best savings accounts available online for you?

#1

An online savings account should be totally and completely free, in other words, no monthly account keeping fee and unlimited free transactions

#2

In most cases online accounts offer reduced penalty fee’s for late payments or dishonored direct debits etc

#3

Your online account should have higher interest than a branch held account and should even be comparable with term deposit rates yet have the benefit of not being tied up for any term.

#4

Whilst you don’t need branch access to an online account you should have direct access via ATM’s and EFTPOS. If you are solely looking to use your online account for saving, then some accounts offer a considerably higher interest but have no ATM access, this means it must be ‘linked’ to a branch account. If the interest and fee structure is great then this type of account is certainly worth having

#5

Free ATM Access. As some online only banks literally have no branches they also have no ATM’s of their own, so be sure that by having an account with this type of bank you are not going to be hit with fee’s for using foreign ATM’s (belonging to other banks) which can be as high as $2 per transaction

At the end of the day we all need to be smart with our money and if you start banking online you’ll be doing just that. But shifting to online banking is not all it takes to get on top of your finances. It doesn’t mater if you have the best savings accounts out there if you can’t keep track of your bills. For example, even though a good online account will charge less for direct debit dishonors, if you can’t organize your banking in a way that ensures you pay bills on time and avoid unnecessary fees you are still paying too much.

If you can afford to have a filing cabinet then get one, one of those little 2 drawer ones are perfect for the job. If you can’t get one, don’t want one, or don’t have room for one then a perfect alternative is a plastic tub or document box, the kind that are sized just right to hold manila folders. Basically what I am saying is that you need to have a specific place for managing your money.

You’ll need to get a packet of manila folders, then give the folders headings according to your income and expenses, plus create one for receipts also. Now you can keep your income slips, cheque butts and receipts all in one location and come tax time life will be so much easier.

Check with your local tax organisation about how long records need to be kept. Some need 3 years and others need up to 7.

Each year once you have completed your tax return, tape 2 pieces of copy paper together, then gather up all your paperwork for that year, wrap the two pieces of paper around all the paperwork and tape together to hold in place. Now you can place that years records at the back of your filing system and write the lodgement date on the part of the paper facing up and it will now be easy to locate should you ever need to.

1. One of the most valuable personal money management tips I can offer is to use a budget planner and you can get mine, the BudgetMama System right here. Having a visual idea of your finances makes the process of keeping track not only easier but more accurate and of course also provides you with that important feeling of control.

2. Opening an online savings account offers you a much higher interest rate than a branch account. Having no branch or ATM access also means you are more likely to keep your savings than dip into them on impulse as withdrawing from this type of account requires transferring the funds into your normal bank account and usually takes at least 24 hours.

3. Don’t save at the expense of your social life, but don’t let your social life stop you from saving. Studies show that people who include an allowance in their budget for enjoyable activities are more likely to stick to their budget and therefore save more in the long term. When you resent your budget and feel restricted by it you will be more inclined to break it and ultimately loose track of the entire thing. Remember, life is all about balance.

4. Review your budget on a regular basis. By establishing the habit of sitting in front of your budget planner and bills one night a week you will be developing a habit that ensures you are always on top of things. In time you will begin to notice ways in which you can improve your budget while freeing up more cash, or perhaps notice a few leaks that need to be plugged before they get out of control.

5. When it comes to regular savings, change your mindset. To illustrate; when you receive a bill in the mail you know you can’t avoid paying it, there is no way around this, it is a social norm. Start thinking of your savings account as a bill that must be paid and even if that bill is only $5 a week; pay it before you do anything else.

6. These days most people (in the first world at least) receive their pay cheque as a direct deposit into their bank account. Decide on an amount of money you can reasonably save out of each pay and ask your boss or payroll department to split your pay cheque with a set amount going straight to your savings and the rest going to your normal account. With that small amount out of sight it is also out of mind and you won’t miss it.

7. Did you know that by shopping at convenience stores like the gas station and mini mart you could be paying between 25 – 40% more than you would at the grocery store? So, shop at the grocery store.

8. Pay loans more frequently; by paying down debt on a weekly or fortnightly basis rather than monthly you will seriously reduce the interest on the loan in the long term.

9. Recognise yourself and know your weaknesses. It’s okay to have weaknesses, we all have them, for some it’s chocolate, for many it’s shoes, but whatever your weakness is, don’t put yourself in front of temptation. If you know you can’t walk past your favourite shoe shop without hearing angels sing at the site of a gorgeous pair in the window; then take a different route.

10. Finally the last of my personal money management tips is this: learn to save money, emphasis here on the word ‘learn’. For most of us a savings habit does not come naturally. Studies show that in order for an action to become a habit it must be done over and over again, I think the standard here is 21 days. But we all know that good habits can be much harder to imprint on our brains than bad ones, so start off small. A great way to learn to save is to choose something you want that is small, say a digital camera for $300. Be specific about your goal by choosing the actual camera model you want then get a catalogue picture of it and stick to the fridge. Now we all know these days purchasing items on store finance is sadly more the norm than actually paying for it with cash, but don’t do it. Decide to prove to yourself that you can buy this item by saving your own money and remind yourself that you will be saving on finance fee’s as well as hefty interest. You know you need to save $50 a week for the next 6 weeks to get that thing which you desire, so whilst keeping your visual goal in mind set about saving that $50 and then reward yourself by paying cash for that camera in 6 weeks time. As you get into the habit of saving, believe me you will actually begin to enjoy the process of setting goals, visualising them, working towards them and then rewarding yourself at the end.