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Smart money - Building with a budget
By Jeffrey Lucy
Volume 49, No. 11, June 28, 2007 |
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STAY STRONG: Setting a budget will help you control your money and level of debt and allow you to start saving, but it takes discipline and common sense to work.
Photo by CAPT Haydn Barlow |
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As an ADF member, you train hard to keep yourself in top physical condition so that you can respond to the best of your physical and tactical ability.
Sometimes it is difficult to apply that same level of discipline to other areas of life, like your finances. However, this is a lot like training your body – to get financial results you need to work hard, be consistent and stay focused on your goals.
Although you’re earning a regular income and some of your living costs, such as rent, may be subsidised, it’s still important to know where your money is going, and how to use it wisely to help you fund the life you want.
Here are some simple ways to help make your financial future more secure:
- Set a budget and see if you can start saving regularly;
- If you’re already saving, see if you can save a bit more; and
- Tackle your debts, especially those with high interest rates.
Show discipline
Budgeting isn’t only for accountants. It is a way of controlling your finances and planning for the long term. As an ADF member, you pride yourself on discipline with your health, fitness and military traditions. Discipline is at the core of the ADF, but how disciplined are you with your money?
It’s a fact of life that money in your wallet always seems to find a way of getting spent. Doing a budget is a method of seeing what you’re earning and what you’re spending, and making informed decisions based on that knowledge. A budget can give you control over your money and allow you to save. If you know where the money’s going, you can establish some disciplined routines to direct it to where it will work hardest for you.
Once you have completed a budget planner, you’ll see the real bottom line: whether you’re saving, standing still or going backwards. Now ask yourself whether you’re applying the right amount of discipline to your habits with money to achieve what you want out of life. If you’re going backwards, look at the things you need – the essentials such as food and petrol – and those you simply like to have or want.
To trim your budget, cut back on the ‘wants’ first – the things that aren’t essential for everyday life. However, don’t cut out all the wants, because if your budget’s too tight, it’s not going to work.
Control those cards
Developing a budget may show you a number of areas that can be controlled. And, if you’re like most Australians, a priority concern will be your credit card debt.
The most dangerous sign of an untrained credit card is making only minimum repayments, which was discussed in ASIC’s last column, ‘Attack your debts’. Your credit card most likely charges the highest rate of interest of any of your loans. If that’s true for you, then paying off your card will probably be your number one priority. Ideally, a well-trained credit card would be paid off in full each month. This will have a big impact on your budget.
If that’s not realistic, especially for times like holidays or Christmas, then pay more than the minimum repayment and stick to that amount. Your minimum monthly repayment is generally as low as 2.5 per cent or $25 for every $1,000 owed. So, repaying an extra $50 over the minimum repayment will make a real difference.
If you owe $1,000, paying just the minimum repayment will take more than 11 years to pay off your debt. So, again, it makes sense to train and develop sensible credit card discipline.
This column is an initiative of the ADF Financial Services Consumer Council. To suggest other subjects for this column, email ADFcolumn@asic.gov.au
| Make your money work |
- The ADF Financial Services Consumer Council and ASIC have produced a free booklet called Making Your Money Work. It sets out savings tips for ADF members and shows that you can achieve a lot, even on a tight budget. The booklet is available at www.adfconsumer.gov.au
- ASIC has a comprehensive budget planner to enable you to convert fortnightly pay or quarterly bills into more manageable weekly, monthly or yearly figures.Download the planner from the FIDO consumer website at www.fido.gov.au via the ‘Managing your Money’ section. |
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