When it comes to our finances, many families meander along, with a bit of budgeting here, a quick decision on how to spend an unexpected bonus there, and steadily increasing credit card debt.

Smart money management isn’t simply about making more money; it’s about making the most of what you’ve got. Take control of your finances. Put together, or update, a plan. Work out how you can meet your needs now and achieve your financial goals.

Every family needs an official budget to see where the money goes each month. Use the information to plug the leaks and put your hard-earned dollars to better use. If you have one, revisit it at least annually to update the figures and check you’re sticking to it.

All budgets are made up of two lists: your income and your expenses. Before you begin, get together all your bank account and credit card statements, payslips and big bills.  

Write it down
First, list all the money you receive each month – wages, pensions and Centrelink benefits, investment income, everything. Next, list all the necessary expenses – essential bills such as rent or mortgage, loan and credit card repayments, transport, utilities, phone and internet, car rego, insurance premiums and basic groceries.

Now comes the tricky bit. How much are you spending on wants or luxuries, including meals out, getting your hair dyed, magazines, alcohol, cigarettes and entertainment?  hese expenses are harder to estimate because you don’t usually have the bills filed.

What now?
Hopefully your income is more than your expenses! Some budgets may end up with a deficit. This doesn’t mean putting the shortfall on credit – instead, work out how to increase your income or decrease your expenses.

Evaluate your goals
If you want to achieve your dreams and be financially secure in later life, you’ve got to do more than just get by month to month now. Take the time to work out what your goals are – what you want in the next year and also the next 20 years.

There are three types of financial goals:

• Short-term goals, which you want to achieve in the next 12 months, such as going on a holiday, buying a cheap car or paying off your credit card debt.

• Medium-term goals, which you want to achieve in the next five years or so, such as renovating the kitchen or taking the whole family to Disneyland.

• Long-term goals, which you want to achieve by the time you retire, such as paying off the house and having enough in superannuation to lead a nice lifestyle.

Once you’ve worked out what your goals are, you need to prioritise and put a plan together. Work out exactly how much you need to save to achieve a particular goal, and how you’re going to do that.  

THE NITTY GRITTY
When you’re doing your budget you have to be ruthless and honest with yourself. Don’t over or underestimate your expenses. If your figures are way off, there’s no way you’ll stick to your budget. And if you fudge the figures to make yourself feel better, you’ll only be discouraged when you don’t have enough money to get by, let alone save, at the end of the month.

Set savings targets
If we just saved whatever was left at the end of each pay period we’d all have a tough battle – because there never is anything left over. Instead, decide how much you can afford to save each month and treat it like an essential expense, a bill that has to be paid upfront. My wife Libby and I take out a set amount at the start of each month when our wages are paid, and this is put away before we start spending. We’re now used to getting by on the smaller amount, and don’t miss it. If you have trouble staying disciplined, put your money in a dedicated savings account that pays higher interest and discourages withdrawals. 

Get in touch
Email us at newidea@pacificmags.com.au or write to Ask the Experts, New Idea, Private Bag 9960, North Sydney, NSW 2059.