Walshy's Budgeting 101: How to Create a Budget
Whiteboard Wednesday with Walshy
In this episode of Whiteboard Wednesday, Walshy shares his tips on creating a budget that you can stick to.
Welcome to Whiteboard Wednesday, I'm Paul Walshe Founder and CEO of Fair Go Finance. As part of our loan approval process, we work with our customers to ensure that the loan repayments are affordable and in doing that we prepare a budget with them. As we've done that thousands of times, we thought we'd pass on some of these tips and what we see as being good habits for customers so that they make sure the repayments are affordable.
So the three things that we're going to look at today are really the KISS principle, planning for the unexpected and making use of online tools.
KISS: Keep It Simple Stu... Simon
The first element really is KISS - Keep It Simple Simon. So in terms of making a budget, if you make it too complicated, you're never going to do it. So pen and paper, sit down with your partner, look at what your regular income is and your regular expenses are. So whether it be full time, part time or casual job or other work, hustling on the side (Uber, AirBNB, those kind of things) - income is relatively stable. Centrelink also could be a part of that as well.
In terms of your expenses, you're going to have routine regular outgoings - rent, mortgage payments, car loans, food, utilities, mobile phone a whole range of things that you should look at in your budget, but typically they'll come to top of mind as you do your budget.
Plan for the Unexpected
Now, income minus expenses leaves you an amount of money you've got to live on and do other things. So those other things can be expected or unexpected events and typically your budget should cater for these unexpected outcomes or events occurring. If you want to go on a holiday, your car needs repairing, kids’ needs, dental bills, medical bills, birthday parties, all these type of things come along seasonally and as we get into Christmas we need to allow some extra budget for presents or for more entertainment. Factoring these events into your budget is also important and leaving a bit of space for those things to occur.
Use of Online Tools
Now in terms of using some online tools, there's a range of these tools that are available to help this KISS process. So ASIC have a really good budgeting tool on their MoneySmart website, there's also apps out there you can use to hive off a bit of spare change or put some money into other accounts - you can do that yourself or through these apps.
Ultimately it should lead to a bit of a nest egg which means that you've got some spare money available and that when you enter into a personal loan you're comfortable committing to those repayments because you know that they're within your budget. All of that will go to help your credit profile and your credit history and your access to credit in the future.
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Thanks very much, bye.