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The Basics of Budgeting

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Mark Tregoweth
Mark Tregoweth

Building something from scratch or renovating involves stretching savings and making the most of our money.
Whether you are building a new house or preparing to renovate every project should begin with knowing what you can afford.
For many people the word budget sends a shiver down their spine as they envisage cutting costs and going without luxuries, but with a little work and a positive attitude the basics of budgeting can help to achieve goals.
 For most of us creating a budget starts with an understanding of our financial status. Checking bank balances, assessing credit card debt, and adding up regular expenses helps to create a picture of what you can and can’t afford.
 A budget should be based upon what you earn (i.e. incoming wages, salary, investment, inheritance) minus outgoing expenses (e.g. rent, food, transport, insurance, clothing, entertainment) which in turn leaves the amount that can be devoted to a project.
For most people this preliminary process creates an awareness of areas where savings can be made and an indication of what cash is readily available. When outgoing expenses are higher than what you earn and a credit card is the only way you can stay afloat, there are fundamental flaws with your finances.
At this point one of two things becomes apparent; how much you have available to spend or how much you need to save.
When more money is needed to realise a project, the next step in budgeting comes down to cutting costs.
Savings can be made by minimising luxury items, avoiding impromptu purchases, cutting up credit cards and curtailing unnecessary spending. Which ever method you choose be careful to make changes that you can live with while you save.
When finances are fixed and savings secured, budgeting for a home or to renovate begins with factoring in all the costs involved.
Legal fees, compliance costs, professional expertise and the cost of construction are a few of the one off expenses involved with building a new home. Insurance, rates and maintenance are some of the ongoing costs you can expect once you have moved in.
Avoid any confusion by consulting with a financial advisor or bank to get sound advice about your finances before committing to any major project.
Be prepared to ask questions, take advice and make changes that will help you achieve your goals. Opt for a flexible budget in contrast to a rigid regime and adopt the basics of budgeting to make the most of your money.
Easy ways to save

An easy way to start saving is to keep a diary of what your out going expenses are and make conscious decisions about how you spend your money.

  • Curtail café costs by taking lunch from home
  • Opt for public transport by leaving your car at home and catching a bus.
  • Shop smart and compare prices.
  • Avoid impromptu purchases by making a shopping list and only buying what you list on it.
  • Budget for what you need not what you want.  Create a budget that lists regular expenses such as groceries, rent/mortgage, loan repayments, transport but also allows for other occasional incidentals (rates, insurances etc)
  • Create an automatic payment to coincide with pay periods so that surplus funds can be transferred into a dedicated savings account.

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