Is checking your bank balance the closest thing you do to having a budget? You are not alone. In fact, over half of Aussies purely rely on their bank balance to manage their money, according to our report: The ‘State of the Household Budget’.

Sadly, this does not help to achieve any financial benefit and has a number of pitfalls. Not convinced? Read on to find out 4 possible financial woes you face if you just rely on that bottom balance figure, and not make a household budget.

Financial pitfall number 1 – Living day to day

If you base your spending on how much money is in your account, you are effectively living day to day. If you have a lot, you spend a lot, and if you have very little…well it depends. You may use credit, cancel any plans needing money or borrow some cash until next pay.

Whichever way you go, the bottom line is you aren’t keeping any in reserves. Living day to day is a dangerous way to live when the unexpected is to be expected. One major expense you weren’t planning on can put you at the very start of a spiral of increasing debt.

Financial pitfall number 2 – Not having financial goals

Do you hear yourself questioning how some people seem to get ahead while you are perhaps still renting or paying off lots of credit? Do you wonder how your friends’ who earns less than you seem to have more? Well, the simple fact is, they more than likely have goals they stick to, and have some form of budget too.

Many Aussies say it’s too hard and will rent for life and not try to save. By pushing this “fear” and “too hard” attitude aside, you will open more doors than you can imagine. It’s time to toughen up and get a budget in place!

danger sign

Pitfall number 3 – You are teaching your children bad habits

As a parent, you always want the best for your kids. But if you only rely on your bank balance, this will wrongly educate them and won’t encourage them to budget.

It’s time to break the cycle and teach them how to save. The only way you can achieve this is sitting down and starting a household budget.

Pitfall number 4 – You could end up with a bad credit rating

If you have no savings and rely solely on your bank balance to determine your spending pattern, then there could be negative consequences. A huge risk is that if a major financial event occurs, such as a loss of a job, accident, sickness or relationship breakdown, you could start missing bills and loan payments, which can result in your credit file being affected.

As soon as you have a bad credit rating, it will make it harder for you to get credit or a loan until it improves. Once a negative entry is on your credit file, it can take between 5 – 7 years for it to clear, so be aware that you may have to wait before you can successfully borrow again.

Now that you’ve sees some of the major pitfalls, you’re hopefully motivated to get a household budget in place. Do yourself a favour and put aside a date and time this month to sit down and get a budget in place. There are many free online budgeting apps and tools available, and you will be amazed at where a lot of your money goes. You may even determine its time to consolidate some debts with a debt consolidation loan! Good luck!

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It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.

Check your options before you borrow:
For more information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor.

Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan.
If you are on government benefits, ask if you can receive an advance from Centrelink.

The Australian Government’s MoneySmart Website shows you how small amount loans work and suggests other options that may help you.

* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.