That Home Loan Hub
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That Home Loan Hub
James Shares Ep #2 - Budgeting Basics for a Brighter Future
Budgeting is often dismissed as a dull subject, yet it holds the key to achieving your financial dreams. We dive into the core elements of budgeting in this episode, emphasizing that understanding your income and expenses is the foundation for financial stability. We'll explore various strategies for tracking spending, whether through traditional methods or using technology to gain insights into your financial habits.
You’ll hear practical advice on categorizing expenditures and identifying areas where you could cut back. We'll discuss how even small changes can lead to significant savings, providing listeners with the tools they need to create a budget tailored to their goals. The conversation pivots around actionable steps that listeners can take today to improve their financial situations, covering fixed versus variable expenses and offering insights into smarter spending.
Throughout this episode, we underscore the importance of having a proactive approach towards budgeting—not just to save but to position oneself for greater financial confidence and independence. Whether you're saving for a home deposit or planning for your future, budgeting is an essential skill that empowers you to control your financial destiny. Tune in for valuable tips, and discover how to put your budget to work for you. Don’t forget to subscribe, share your thoughts, and reach out for our budget templates to kickstart your journey!
Hello and welcome to our series of James Shares. James, welcome back.
Speaker 2:Thank you for having me.
Speaker 1:James, let's talk about something really, really important today that everybody must know when it comes to daily living.
Speaker 2:Okie dokie. A lot of people don't like this subject. As soon as I say the word, folks will go oh my God, what a bore. But if you really want to get that thing that you want, I think it's important.
Speaker 1:You've got to do this.
Speaker 2:You've got to budget for it.
Speaker 1:So what are we going to talk about?
Speaker 2:We're going to talk about budgets today and how they can help you get what you want.
Speaker 1:Awesome Budgets. Here we come, James. What is a budget?
Speaker 2:Awesome Budgets. Here we come, james. What is a budget? Well, let me just start off by saying why it's important. The main thing if you're trying to achieve some sort of goal, like save a deposit for a house, is you need to spend less than you earn. If you're spending more than you earn, you're never going to achieve the goals that you want. So it doesn't matter if you've got a really high income or a really low income. It's pretty common that if you're on 200 grand, you're going to spend 220. It's just, for some reason, it's the way people are wired. So with a budget that can help navigate that, so you can you can achieve those goals you want. So a budget is pretty simple really. You just You're on one side of your budget. Have you got your income, so your salaries or any rent you might get from a house, or Anything that drops into account is a credit note.
Speaker 2:Or a cash and bank.
Speaker 1:Cash and bank Credit note.
Speaker 2:Yep, so you could add that those would be the main sources of income Everybody would have. You know, some people would also have dividends as well, from shares and all that kind of.
Speaker 1:Thing.
Speaker 2:Benefits, yep. So that's all your income, and then on the other side of it, you've got your expenses. So you add up all your income, you list your expenses, which could be anything from rent to food, uh, utilities, power and all that sort of thing, your insurances, entertainment, um. But I guess the hard thing is finding out. You know, you. You probably know what your the items are in your budget, the main items but you don't know how much each one is costing you. So how do you go about?
Speaker 1:Yeah, how do you find out?
Speaker 2:Well, what I do. Look, it takes a little bit of time at first, but it's quite easy nowadays because you can just go online onto your bank accounts and you can download a statement for your credit card for the last month and for your check account for the last month. Those are the two accounts that you use for income and expenses and you can just go through those statements. It could be a couple of pages and you just circle the ones that are food, you know, and then circle the ones that are, you know, perhaps utilities or insurance, and you lump them together and you put them, you know, on either side of the budget, depending on whether they're an expense or an income.
Speaker 1:That's if you're like old fashioned. But I'll share a tip, james Now nowadays, actually, on online banking, it does a lot of that work for you. So you can actually go on your online banking through the computer. I don't know if it works through the phone, but there is like a spending tracker and you can label different spending and then you can hit press report for the last month or six months or whatever, and it will actually categorize for you and it will create a beautiful wheel chart that will show you what your money is going on.
Speaker 2:And that's absolutely right. So you can do it like that way and that's what I would suggest people would do once they understand, because I find it really useful to take the time to do it myself and understand how it all works and then you can jump to that next step. But yeah, if we're pushed for time, absolutely do it that way. I just find it really useful to get into the details, because I love that kind of stuff which is a bit creepy.
Speaker 1:You're a numbers nerd James.
Speaker 2:I can tell you, for example, that we spent $1,600 on food last month.
Speaker 1:Wow, that's a lot of food.
Speaker 2:Yeah.
Speaker 1:For a family of four right. But, you've got teenage kids and they do a lot of sport and you do a lot of sports, so you probably buy quite a lot of it.
Speaker 2:It's a big expense, so we tend to eat sort of quality food. We don't have a lot of entertainment costs because what our kids do is our entertainment Sadly driving the kids around to different things, so we don't have time for entertainment.
Speaker 1:I love it.
Speaker 2:So we spend a lot of money.
Speaker 1:So sitting down looking at what goes in, what goes out and what's left at the end of the day is super important, because then what do you need to do next?
Speaker 2:Well, I think what you need to do is, firstly, is you have a look at what you've done in the past, right, and then you can use that information to set up your. You know your budget for the following months, but you can look at your spending once you've categorized it and you can see. You know I'm spending like $100 a week on coffees. You know you're not going to spend $100 on coffee probably, but let's say $50 a week on coffee. Or you know morning teas or something like that. So you know over the month that's say $50 a week on coffee or morning teas or something like that. So over the month that's over $200. So if you are really trying to spend less than you earn and you're saving for that deposit, there are certain things that you can pull back. You can't pull back on your rent, possibly your food a little bit, maybe not. Your power can be pretty set. So you're looking for those items on your budget where you can make some big moves.
Speaker 1:Because I guess there was like fixed commitments and non-fixed commitments.
Speaker 2:Absolutely.
Speaker 1:The ones that you can dial down or dial up, the ones that you don't have to pay.
Speaker 2:You know. So your fix would be, you know you, I suppose, your power, your mortgage, would you include food and fixed? I mean you have to have it, don't you?
Speaker 1:you'll probably have a budget, as you say, I'll probably go back three months and have a look what was my average spend on food and whether there was something I could have done better.
Speaker 1:Yeah, you know, whether it's meal planning like doing it through hello fresh, for instance or, um, you know, supermarket shopping. What I'm doing at the moment is, um, I do a lot of online shopping for my groceries, so that way I'm not tempted to just feel the trolley as I'm walking around the shop yeah, that's a great idea and that's what we try to do as well, because you can order it all you know beforehand and you tend to stick if, stick.
Speaker 2:if it's too much, at the end of yeah, you can just take off things off the cart.
Speaker 1:And yes, it costs money for delivery, but actually $9 for delivery versus another $50 that I would have spent extra driving there getting extra items that I probably don't need. Oh my God, you know all those cravings that you get when you're in a supermarket but actually sitting down with a cold head looking at your pantry doing a cross check Do I have the rice, do I have the pasta, do I have the meat? Yeah, I think that really helped me to get better at my budgeting.
Speaker 2:I think the key is you don't do your shopping when you're hungry.
Speaker 1:Oh, absolutely, it's the worst possible thing you can do.
Speaker 2:So have a nice big meal at home and then go do your shopping.
Speaker 1:Absolutely, that's awesome, all right. So for those that are listening guys, what you really need to do is look at what's coming in, what's going, how much is left at the end of the day and what you can do to improve that position and start saving. But what I often do as well as I go that extra step prior to it is how much do you actually need to save and by when? So then you know how much you need to put aside to make sure that happens.
Speaker 2:Yeah, absolutely, and and that's how all these things can work in together like once you know what your purpose or your goals are, you can set up your budget um to achieve those, to work towards that over the medium term, and then you can actually see. That's where your budget ties in with your net worth document, because if you're doing things correctly in your budget, you should see your net worth improving. Your savings should be going up, kiwisaver improving, mortgage, going down, all that sort of things. So the better you can do in your budget, the more you can do for your net worth Perfect.
Speaker 1:Love it, love it. Well, I hope listeners today have taken away something from it. We do have some budget templates to share, so if you do want to get hold of our budget template that James kindly created, please feel free to get in touch and we'll share that with you.
Speaker 2:Absolutely.
Speaker 1:From the episode of James Shears Well done, James.
Speaker 2:Thank you, thank you, see ya, bye.