Gareth Daniels is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee
Budgeting has always been a watch word for people who want to plan for a successful financial future. At times it has even been a bit of swear word for some as it has implications of being restrictive, a list of things that you can’t do if your serious about saving for a house, a holiday or just putting away for a rainy day.
As a planner I have always been more inclined to regard budgeting as a positive action, I need to know where my money is going in order to ensure I can keep enjoying my today whilst I build for my future. This concept of staying on top of cashflow has never been easier or more difficult.
Apps such as Pocketbook; TrackMySpend; MoneyBrilliant; and Goodbudget mean that rather than having to keep receipts, take note in a book or fill in columns on a spread sheet you can link these apps’ to your bank accounts so they automatically track your cashflows by picking up the transactions that take place.
This is incredibly powerful particular if you really engage with the app’ as by categorising transactions (such as phone and groceries) they learn what those expenses are going forward meaning it has never been easier to see where your money is going.
And then comes the down side; the disconnect being how much you are spending and the ‘tap happy habit’ meaning it has also never been easier to spend
Talking to an older client the other night she spoke about how powerful it was to her to physically spend paper notes; she hated ‘breaking’ a $20 as she would then run the risk of frittering the rest of it away. It was a reality check to actually take a note or even coins out of your purse or wallet and hand over your hard earned in order to buy something.
The reality is that people’s budgets don’t only blow up because of spending on big ticket items; it’s the odd $20, $10, $30, $10, $20 here and there. And that is now a very easy thing to do without realising.
The ability to simply tap a card to complete a transaction has created a disconnect between the reality of what is being spent and the understanding or perception of what is being spent.
So what to do? Well take the good with the bad…
- Understand what you earn; know your take home pay
- Use a cashflow management tool (like an app’) to track your outflows specifically identifying
- Non-negotiable expenses (rent or mortgage, utilities*, petrol, groceries etc)
- Set savings
- Discretionary spend (enjoying yourself!)
- Make informed choices about where your savings should go
- Draw a connection between how often you’re tapping and what that means for your true level of expenditure
Knowledge is power and power is control; you’re working hard and its your lifestyle; be in control of what your spending and enjoy life today while building for your future and don’t get sucked into spending too much just because the banks have made it easier to spend!
*You can make some strategic decision here too around what you ‘need’ to spend on your mobile phone and internet packages versus what you want!