No two people spend their money the exact same way. This is because personal values influence spending decisions. Guides for spending and saving should be a personal matter. The first task is to identify your goals. You then have to decide which ones are the most important and how long you have to complete them.
Short Term - up to 12 months:
Develop a balanced budget - be honest and factual. Don't guess at what items/services will cost. Find out. Itemize everything. For example, it's easy to add up things like mortgage, utilities, car payments, credit card payments, and then merely guess at the cost of food and entertainment.
Catch up with household expenses. Be merciless. Make sure you have all of the household items on your list.
Vehicle repairs. Look at what you've spent in the last year, consider the age of your vehicle and make sure you have budgeted enough to cover eventualities. Older cars frequently have 'bouts' of maintenance. If the alternator goes, quite often the brakes need attention soon after. Car parts seem to age in groups. A new clutch or transmission might be quickly followed by the need for a new exhaust. If you know your vehicle will need work soon, get estimates now, from at least two sources, and be prepared.
Intermediate - 1-3 years:
Establish an emergency fund. Disaster doesn't always strike somewhere else. A long power outage in winter can cause all kinds of havoc with finances. Loss of work, frost damage to your home and plumbing, medical bills from illnesses brought on by lack of heat and so on. An emergency fund can also be used to cover unforeseen expenses such as travel to be with an ill parent, sudden health needs of children not covered by medical insurance and sudden loss of employment.
New vehicle. If your present vehicle is getting old, plan now to buy a new or newer one. Do research now on what to buy and what it will likely cost. Be sure you can afford the vehicle you want.
Vacation. It's nice to get away now and then but a vacation that leaves you in a financial hole is not really restful. Put money away every month now and be sure to plan a vacation that is appropriate to your resources.
Long Term - over 3 years
Children's education. Money set aside in an education fund when a child is born can grow to a very useful mount when it's time for university. By looking after these needs now you will not only help your child along the path of higher learning you will also be looking after yourself and your family as whole by not heading into sudden debt later.
Home ownership. When you rent you never establish equity in your place of residence. Your landlord has all the equity. Planning early to buy a home can be a sound investment but only if your dream house can be supported by your income. By budgeting and planning around ALL of the costs of living you can come up with a mortgage payment you can actually afford.
If you are young, you might think you have plenty of time to look after your retirement needs. You don't. Small sums of money put away regularly add up.
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