Financial counsellor Colleen shares some ideas for managing money.
Rather than looking at a structured budget and the expectation for people to stick to it, let’s take a look at the structure of spending itself.
Bottom Line Budget
The bottom line budget is the minimum requirement to cover housing costs, food, utilities, transport, medical, insurances and telecommunications. This gives the individual or family the minimum funds required before making any choices about car loans, credit cards or other lifestyle choices.
Breaking down what’s left after the bottom line budget has been allocated into daily allocations can be sobering. If $200.00 remains when the fortnightly necessities are paid, this translates to $14.28 per day for ‘optional’ spending.
With opportunities available such as ‘buy now pay later’ or 36-month interest free purchases with a credit card thrown in for good measure, this optional spending disappears very quickly. Unforeseen circumstances can quickly move a household from ‘just managing’ to ‘financially stressed’.
The Credit Code
Contract variations, moratoriums, cancellation of credit facilities, short term and longer term payment arrangements can all assist in moving financially stressed people back into a manageable space.
Addictions, family and domestic violence, imprisonment and serious health issues can quickly shift a financial situation into something that seems impossible. Looking at resources that may not have been evident and getting an independent professional view can uncover several pathways to financial recovery.
Where returning to contractual obligations is unlikely, payment offers, arrangements with a time limitation and in some specific situations waivers are all possible options.
We are constantly bombarded with advertising and messages that encourage mindless consumerism. Knowing the bottom line before committing is a good strategy to financial survival. Given all the unforeseen things that occur in our lives, the only foolproof method is to try to avoid over-extending your borrowing at every opportunity.
The Traffic Light System
These expenses are generally dictated by a third party and require some kind of contractual obligation. Examples include rent, mortgage, insurance, contracts for lending, credit cards etc
The ‘ambers’ are necessities that we can control to some degree with careful spending and consumption. Examples include food, clothes, electricity, water, telecommunications etc.
Finally green means ‘go’ of course and that’s where the remaining funds can be allocated to optional spending e.g. alcohol, cigarettes, cinema, lotto, renovating your house, shopping sprees!