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Budgeting and dealing with unexpected events
Budgeting and dealing with unexpected events
What if you’re not saving any money, not saving enough or unexpected events throw your finances into disarray? Budgeting and being prepared for unexpected events can change things for the better, often without too much pain.
Budgeting: what you need, and what you want
How to cut costs and boost savings
Getting help with budgeting
What if you can’t pay your bills?
What if you get retrenched?
What if you get a windfall?
Update your budget every year
Budgeting: what you need, and what you want
The best tool for finding extra money is a budget.
Look at the things you need – the essentials, such as housing and food – and those you simply like to have, or want. When you need to trim the budget, cut back on the ‘wants’ first – things that aren’t essential for everyday life.
Don’t cut out all the wants, because if your budget’s too tight, it’s not going to work.
Use FIDO's Budget Planner to help you work out your budget
How to cut costs and boost savings
The best way to save is to put money away as soon as you are paid and before you spend.
Savings tips
| What you can do | Potential savings | How it could work |
| Have an easy access cash account for everyday needs, with a debit card attached | Reduces need to use credit card; earns interest | Get your pay deposited into this account |
| Save or invest a fixed amount of money every pay in a separate account | More for your future goals, and an emergency source of money | Get your employer to pay direct to your account or have a fund manager direct debit your bank account
Direct debits - how to make them work for you |
| Save your pay rises, bonuses, special payments or tax refund | Savings build up significantly over time as you continue to live within your existing budget | Increase your automatic savings amount. Immediately invest your extra money |
| Pay your mortgage fortnightly, and pay an extra 5–10% extra on your mortgage every month | Saves interest costs and pays off your mortgage sooner | Get your lender to deduct your mortgage and extra payments fortnightly
More information about owning your own home sooner |
| Budget a specific amount for fun, leisure and personal expenses | Controls impulse buying | Makes it easier to stick to your budget |
| Put your change into a savings jar at the end of each day | Creates a little pot of ready cash | Use this money for small personal expenses |
| Make extra superannuation contributions from your pre-tax salary ('salary sacrifice') | More money for retirement and less personal income tax paid | Discuss with your pay office, but make sure that you can afford to make extra contributions
More information about making extra super contributions |
Tips for cutting costs
| Ways to cut costs | Potential savings |
| Pay by cash or EFTPOS instead of using credit | Encourages saving because you use your own money (which is limited) instead of borrowing it. Saves interest on credit cards |
| Pay credit cards off in full each month | Saves about 16% per year on your outstanding balance
Read FIDO's tips about managing your credit cards |
| Use lay-by for Christmas shopping or save small amounts over the year | $25 per week would mean $1,300 in Christmas cash, avoiding high credit card bills in the New Year and interest payments |
| Combine multiple accounts, such as cheque and savings accounts at the bank, and separate superannuation funds | Saves fees and charges
FIDO's tips about checking your account fees |
| Use internet or phone banking | May save bank fees |
| Take your own lunch to work | If you save $4 per day, that’s $1,000 a year |
| Save for your next car and choose a lower-priced model. Then shop around for loan and insurance deals | A big deposit reduces the total purchase price, and you may also get savings on borrowing and insurance costs.
The dealer’s finance or insurance deal may cost more. Consider paying off any insurance monthly if there is no penalty. It's usually easier to pay a small amount each month than a large amount once a year. More about car insurance |
| Use pre-paid cards for your children’s mobile phones | Make your kids top up the card themselves if they spend too fast |
| Use self-catering holiday accommodation | Saves on eating out at cafés, hotels and restaurants |
Keep a watch on fees and charges
Every dollar paid in fees, especially 'ongoing fees' reduces your income or earnings from investments, so it pays to keep a close eye on fees and charges. For example, selecting the right deposit and payment accounts for yourself or changing the way you deposit, withdraw or transfer money may save you money by reducing fees. More about fees and charges on banking and investment products
Getting help with budgeting
Genuine help with budgeting is often available free of charge through financial counsellors. There's no high-pressure selling, and a financial counsellor will help you set a budget you can really live with. See our list of financial counselling organisations
Beware, however, of budget plans sold by high-pressure selling. You could end up paying $5,000 or more for a 'budget' and a 'monitoring service' that the salespeople claim will help you pay off your loans faster. Unfortunately, these budgets can be totally unrealistic, involving all sorts of sacrifices that no-one could live with, and force you to give up on the budget altogether. The so-called 'monitoring service' to keep an eye on how you're going may also be largely useless.
What if you can’t pay your bills?
Stay calm and work out what you can reasonably pay each person to whom you owe money (your creditors), considering both your living costs, rent or mortgage, and all your debts. If you need more help with budgeting or financial problems, talk to a financial counselling service. Financial counsellors help you take control of your situation.
Contact your creditors promptly and tell them you are having financial difficulties and want to discuss repayment arrangements. This is especially important if creditors hold security over your home, car or other assets. Offer only what you can reasonably afford to pay, and offer something to each creditor. Try to cover interest or charges applying to the debt. Ask if the creditor will agree to reduce the interest on the debt until you can get back on your feet. Confirm any agreement in writing.
More about dealing with money problems
What if you get retrenched?
Before making any decisions, taking any money or signing any documents, find out your entitlements and the best way for you to deal with any money you may receive. You may not be able to undo a decision you are unhappy about. Centrelink’s Financial Information Service conducts seminars on retrenchment and financial issues and can offer face-to-face interviews so you can find out about all of your options.
Ask someone who understands your terms of employment and your superannuation benefits, how much tax you’ll pay and what makes the best sense for you financially. If you belong to a union, they may be able to give you free advice. What to do with your super if you're made redundant
What if you get a windfall?
Above all, go back to your personal goals. Consider paying off all personal debts first and then your home mortgage. If there’s still money left over, consider making a personal contribution to superannuation, a contribution to your spouse’s superannuation or starting to invest. Windfalls can easily disappear through unplanned spending or hasty investments. For large sums of money, you may need the help of a financial adviser.
Read FIDO's tips about getting good financial advice and investing - where do you start?
Update your budget every year
FIDO suggests you review your budget every year or whenever you experience a significant change to your income or expenses like getting a pay-rise or new job, selling your car, extending your family or buying a house.
As you become more familiar with budgeting, you may wish to add a percentage to your cost of living to cover increase in products and services and inflation. Roughly speaking inflation is expected to increase costs by about 3-4% per year, or $3 to $4 dollars for every $100.
Use FIDO's Budget Planner to help you work out your budget
More about managing your money
FIDO Website: Printed 08/21/2008
