Top Tips Thursday #5 - doing a budget, part 2

See here for part 1. Now, this is the hard bit. Doing something with all the information you've collated.

Part 2

I like to deal with our figures by the pay period with which we get paid. ie, monthly in our case. If you get paid weekly, go weekly. If you get paid fortnightly, go fortnightly.

Consider your aims. You're typically not doing a budget if you're looking to spend more money! You're doing it so you can look at ways to save money - either to pay off debt faster, live on a smaller income, or save for something special. Keep these goals and aims in mind as you go, but don't forget - don't be TOO stingy! If you are, you'll find you won't stick with it.

Step 1 - Decide whether there is anything you can do smarter. Here are a few starters:

• Can you switch your $30 mobile plan to prepaid, and use it less.
• Can you switch your homephone and Internet to a VOIP plan. We don't have naked ADSL at home, so we still need a homeline, but we are on the budget plan and only pay for 13/1300 numbers. Our bill is only about $24 a month. Our calls are all 10c domestically, a little more for mobiles.
• Is there a better Internet plan you can be on?
• Can you find a bank with a better fee structure (or better yet, fee free, like BankWest!)
• Can you try menu planning, and going to the F&V shop, and see if you can reduce your groceries by 10%?
• Could you try and limit your takeaway to once a fortnight, and cook extra one night so you have a quick meal in the freezer to reduce your temptation to get takeaway.
• Can you use your car less?
• Are there cheaper insurance companies?
• Can you give the kids a haircut (until they start caring, anyway!)
• Can you reduce your gift expenditure by 10%?
• The list goes on! If you'd like more tips, let me know.

Step 2 - Consider how you pay your bills

Everyone likes to deal with their bills differently - but I'm sure most of us hate being late! You get charged with most companies now for being late - and $10 here and there, or interest on a credit card all adds up to money in YOUR pocket. Don't be lazy, be smart!

A couple of things that I do, given that we're paid monthly and on a single income, is to BPAY a little of our utilities every month. I've averaged our our expenditure on bills over the year to a monthly figure, and I transfer that over each month. If I get in front, some months I get a breather, or relief when it's a hard month - like Christmas - when I need the extra $100. By all means, I could also put this money in the bill account, but I found the amount of interest was minimal, and there was more temptation to spend it then.

Another thing I have going is a dedicated Bill Account. I transfer away a set amount each month for those 'big' bills - like home and contents, CTP, Rego etc, all according to the history I've accumulated. I usually add a tiny bit to add for inflation. This means I have the money there for those big bills, when they come (usually all at once, in June!), and I earn a little interest too.

I don't like to pay bills (such as insurance) by the month, as they often incur extra charges.

Step 3 - Make your budget

Using the categories you used in Part 1, you need to create your plan. You can add extra categories if you need to. Your plan on what you'll be spending your money on. Be realistic. And like I said earlier - don't be too stingy! A budget isn't set in concrete, you can change it if you find it doesn't suit. I like to use Excel, namely because it's practically free. I find software like MS Money TOO constrictive.

Don't forget to include your income, your savings, your essentials and your discretionary expenditure (eg swimming lessons, preschool). Make sure you pay yourself first - include some pocket money (or sanity money) for yourself. Use this money for special things YOU want. I pay myself $20 a week, and this includes coffees, morning teas, magazines, special lipsticks, moisteriser etc.

Step 4 - Compare your numbers

Do you currently spend more than you earn? If you do, I'm sure you'll find you have a credit card debt, your savings are going backwards, or your mortgage is getting bigger.

Now, get your total (regular) income. Deduct your total budgetted expenditure.

If you have a positive number, you've got a bit of extra money to save or spend.

If you're negative, you're going to need to go back to step 1, and especially look at your discretionary expenditure. Does Little Miss really need to go to swimming AND dancing AND gymnastics AND netball? Could you try skimping a little more on clothes? Could you implement a water and electricity saving plan to reduce those bills by 10%? Do you really need 2 cars?

Step 5 - Review your budget

If you're still panicing (and we all do it), you either need to cut down your spending some more, or you need to earn more money. You need to cover your necessities but you can cut out some 'luxuries' (ie anything you don't need to survive!). Be hard. Ultimately, you don't need foxtel. You don't need a mobile (unless it's for work). You don't need 5 pairs of PJ's each for the kids.

You could also look at ensuring you're receiving your full Family Assistance or any Centrelink entitlements. Can you consolidate some of your higher-interest debts to a lower interest rate or take advantage of 6 months no-interest credit card?

Step 6 - be serious with your budget!

Hubby and I have an 'appointment' each week where we review our budget and expenditure. It takes work, but it's important! We review it to see if any of our figures are too low, too high, or just right, and adjust figures as necessary. We review where we could have NOT spent money, and where we are tracking well.

It's easy to go back to old habits, which is why we review it regularly - or we often find ourselves not worrying about being $50 over here or there.

Don't get me wrong, you can't be perfect all the time. ;) We make our fair share of blunders and mistakes, but the difference is we KNOW about it. We know where our money is going. Where we're getting it from.

And it's easy to keep your head in the sand.

But it's nice to have your head up, admiring the view, knowing that you've done SOMETHING to help you achieve your goals.

Next week, I'm going to blog about eliminating debt.

Top Tips Thursday #5 - doing a budget

Part 1 - how to do a budget

I'm going to complete this tip over a couple of weeks. First, I'm going to start with some basics for homework!

Expenditure

The first thing you need to do when doing a budget, is learning to know where you ALREADY spend your money. Easy, you say? But do you really know that all those $5 and $20 really add up to more than you think? Do you say "we spend about $x a week/fortnight/month on groceries/takeaway/bills?". ABOUT isn't enough. You need to know HOW MUCH. I'll bet you'd be surprised just how much in most cases!

Go through, on a piece of paper or even in Excel and list all your major categories of expenditure. You need a few columns too - the aim is to get around 2-3 months worth of information to REALLY get to know habits, and to try and include all of your regular bills.

Ours has categories, and sub-categories for our expenditure, as listed at the bottom. Don't have a random category for "Credit Card". You should get a credit card statement, so that needs to be split up into the different categories too! Don't be too vague either. Though, if you spend a lot of money at (say) Target, but you wouldn't know exactly what you would have bought, TRY and split it into gifts/homewares/clothes, or just put a "target" category. You'll have to work on that when you get to Part 2. And you actually start setting your budget.

Once you have your categories, you need to go through your statements and enter in all of your information. You can use best guess if you like. I've now got around 6 years of information, so I know my habits well. At first, it was a shock though! Some of the categories, I hadn't considered.

This is part 1 of my tips of how to create a budget. Below are the categories I personally use.

HomeBanking -Mortgage (variable), Mortgage (fixed), Mortgage (variable, extra), interest free payment

Food - Groceries, Takeaway, Alcohol, Other

Savings

Other regular expenses - Swimming Lessons, Preschool fees, School Supplies, WW, Pocket Money,

Transport -Fuel, Train, Car registration, Car CTP, Car Servicing & Tyres, Trailer Rego, M/c Rego, M/c CTP, M/c Servicing & Tyres, Tolls

Bills - Utilities, Rates, Electricity, Gas, Water, Telephone, Internet, Mobile

Health Care - Doctor Fees, Chemist, Other

Insurance - Health Insurance, Building insurance, Contents insurance, M/c Insurance, Car insurance

Clothing - Katy, hubby, DS#1, DD, DS#2

Animals - Vaccination/medications, Clipping, other supplies

Recreation -Entertainment/Leisure, Hobbies, Holidays, Toys, Other

Grooming -Haircuts, Dry Cleaning, Other

House -House Improvements, House Maintenance, Gardening, Repairs, Furniture, Appliances & Décor, Appliances, Other

Misc - Gifts, incl christmas, Postage, Stationary, Photos, Computer Supplies, Christmas Account



Income

Don't forget your income either! This is obviously equally as important. Make sure you know how much you get paid - albeit it weekly, fortnightly, monthly or less frequently. Include everything - dividends, interest, sales from your hobby, overtime, family assistance etc.

I personally split up our wage (well, hubby's), into "core" income - ie what is regular and what we KNOW we will get every month, and another category for his overtime or on-call allowance. This way we know our budget has to fit within his "core" income. Extra's - like extra takeaway, or special tickets, usually come out of our on-call allowance and is something we can go without - ie frivalous, not and usually unnecessary.

Top Tips Thursday #4 - in the kitchen

A short and sweet (albeit late!) tips this week.

I save a few dollars in the kitchen by making my own stock and evaporated milk. They're two ingredients I use on a regular basis, and cost next to nothing to make. I tend to still use powders where I don't need the entire liquid, but just the richness of the flavouring.

Stock
To make your own stock, put leftover bones from a roast (usually chicken or beef bones) into a large saucepan and cover with water.
Add a good dash of cracked pepper, bay leaf, and some leftover diced vegies. I like to use onion, carrot and celery (if I have any).
Bring to the boil, and simmer on low for a couple of hours. Skim off any froth as you go.
Strain the stock, bin the bones and vegies.
Refrigerate stock, and lift out any fat that comes to the surface.
You can then store in in 1 cup quantities (or in ice-cube trays) in the freezer, or in the fridge for a week.

Evaporated milk
I got this tip from Simple Savings, and it's one I've been saving a fortune with for the better part of this year! Add 2/3 cup of skim milk powder (or full cream if you're that way inclined) to 1 cup of water. Simple as that. With a tin of evaporated milk costing around $2.50 (less on special), I use a tin every week or two, so I'm saving around $80 a year alone with this tip.

Top Tips Thursday #3 - Pets

A lot of us have an animal (or two or three!). No, kids don't count ;) Pets can make a great member of your family, but they do require attention and maintenance. Over the years we've had to cut back on how much we spend on our pets, without compromising their care.

We did have two little Pomeranian X's - Rascal and Prince, but two years ago, they went for a large digging spree when we were away overnight. It was the one area we hadn't dog proofed, and Prince got out, never to return. Rascal did try to follow, but he is slightly bigger and didn't get out, and hurt his back in the meantime. He was microchipped and had a tag on, but he was never returned. We scoured all the local roads, phoned the pound and local Vets. Nothing. We have a feeling someone dog-napped him. At least, that's what I have to think. He was the most affectionate little thing. We do still have Rascal, however, and he is still the fittest little thing. He also tags along on our daily walks.

Now for some tips -

Buy your heartworm, allwormer and flea treatments online. We saved close to 40% buying them online, as opposed to buying at the Vet or in a pet shop. Places like Vet Shop Online and Pet Super Savers. Keep Googling, you'll find others to compare! Some have sales and offers, and don't forget to compare postage costs. Average save per year for us was at least $50 per dog.

We do a bulk meat shop every two months or so. We then spend a good hour or so cutting it all up and bagging it. But there are, more often than not, off cuts that aren't a good enough grade for us to eat, and we put it in a pile to make "dog stew". I usually make a beef stew and a chicken stew, and depending on the quantity of "meat". In a big saucepan, I'll add the meat, half a cup of rice, a cup of vegies (usually whatever is looking a bit limp in the fridge or frozen ones), a slurp of oil, a teaspoon of salt and water to just cover it. Let it simmer for 20 minutes or so, cool a little, then blend it. I'll freeze it into a couple of batches, but out of each bi-monthly shop, we usually have enough off-cuts to make a week or twos worth of dog food. Average save, a weeks worth of dog food each month, saves us $40 a year.

Wash your dog yourself. I know, this seems obvious, right? But when we were both working, we couldn't be bothered finding the time to shampoo our dogs!! When, in reality, it only took half an hour per dog to give them a thorough wash and brush. Average save per year, based on a wash every two months @ $30 = $180.

We'd often also get them groomed, and their nails cut. We invested in a proper electric grooming kit, dog nail scissors, for a total outlay of about $150, and they're still going strong 3 years later. I reckon, per dog, we were getting them properly groomed two or three times a year, and we'd be saving $120 a year, after the initial outlay of the tools (it was moreso, given that we had two dogs at the time).

In regards to toys and things, we don't buy a lot for our dog. His favourite toy is a ball with a squeeker in it, and we buy him a new one each Christmas! But you would save a lot buying them from discount shops like the Reject Shop, or some marked down bargains from supermarkets and big chains. And that's how we've saved almost $400 per year (per dog!) without compromising their care.

Top Tips Thursday #2 - Saving on Insurance

I have to say, Insurance is one of those somewhat annoying necessities in life. Be it life insurance, income protection insurance, car, health, contents...

Because insurance is so popular, and there are so many providers, it means that there is also a variety of ways to save yourself a bit of money, whilst not compromising on the level of cover you're getting. In saying that, it pays to shop around for price and value.

As a couple of examples, even this year we've saved money in several ways. As my husband is the sole earner of the family, we have some reserves in our savings account should he get sick, or something happens to his job. But should it be more permanent or long-living than that (ie several months), we thought it was important to get some income protection insurance.

We managed to save 35% on our premiums for it, but having it deducted from his superannuation fund - we contribute a tiny bit more to his super, and it comes from his super. And it's pre-tax, so we save the tax component of around 35% on the income protection insurance, or around $30 a month.

Health insurance - do you really need obstetrics cover? Have you remembered to take it off if you've finished having children? You'll probably save at least another $20 a month. If you're young and fit, do you really need top cover? Do you just need hospital cover to save you on any government taxes, or just the basic cover so your dental and other preventative checks are covered? You could save another $40 a month. We just have basic cover, though we have considered even scrapping that, and simply getting hospital cover, and saving the $50 in premiums each month to put towards our dental checks separately to the health fund.

Car insurance - In NSW, there is the Motor Accident Authority, that will compare greenslip (CTP) prices for you. I'm sure there is something similar in other states, and if not, compare the top 6 or so insurance companies and do some quotes online, and compile them in a spreadsheet or piece of paper. Our "6" is due for renewal next month, and although I compared prices last year, I've still managed to save $40 this year by switching to GIO, instead of the NRMA. Last year the NRMA was cheaper, but not this year! I'll probably still call NRMA and see if they'll price match, but regardless, I'm not overly brand-loyal in that regard.

Likewise, our comprehensive insurance is also due for renewal, and again, I did a few online quotes with NRMA, AAMI, Bingle and GIO. I will save $120 by switching to GIO, possibly a little more if we go the CTP and comprehensive insurance together. Surprisingly, Bingle was more expensive for the "6". Again, I shopped around last year, but things change in a year, and this year GIO was cheaper than NRMA, despite our multi-policy discounts.

We have a station car for hubby to use to the station, running around town and the odd trip to work. AAMI had previously been our insurer, but a new-ish company to the market - Bingle (underwritten by AAMI), was seriously $300 cheaper last year!! The a car that is 9 years old, and is relatively low risk.

I find some insurers "prefer" to insure some cars over others as they're typically lower risk, and therefore the premiums will be lower, so it pays to take this into account if you're buying a new car. Also, don't forget to check what your car is really worth too. Places like Redbook, or even the car classifieds, can tell you typical used car prices similar to yours. If your car is over-insured, it will cost you more in premiums.

Building and Contents - I'm just in the process of checking out our Contents insurance now, but doing a brief shop around, what we already have with NRMA is already the cheapest, so it's not going to pay to change, having said that, I also think we're grossly under-insured for contents (by at least half!), so the price savings might change.

By using the tips above, and spending an hour or two researching, in the past 12 months alone, I've saved over $1,000 in insurance premiums.

Top Tips Thursday #1 - how to save $200 a year in the laundry and bathroom

I've decided to do this every Thursday, with my top tips for saving money around the house, and I'll do a different room or area each week. I know a lot of these tips might be basic for some of us, but a lot of others hadn't even thought about how a few small changes can lead to some huge savings.

Laundry and Bathroom

Powder
- Use half a scoop per wash, instead of a full scoop. Often you'll get the same results, especially if your clothes really just need a freshen up. I only use full scoops on very dirty loads. This will make your laundry powder go twice as far!
- Shop around. A Duo powder was rated best by Choice Magazine for best value washing powder, when taking into account price and performance. I never pay more than $2 per 500g (the NEW size), and it lasts me about 10 days using the half scoop method (I do about 2 loads each day).
These tips are saving me $6 a month on powder, or $72 a year. Whilst I know there are recipes for making your own powder, I haven't gotten to that... YET!

Vineger as fabric softener - Use vinegar as a fabric softener instead of the expensive traditional fabric softners. It will cost you about a quarter of the price, and a $1.09 bottle lasts me about a month (I only use it on clothes, not on towels, sheets or tableware). It has a double benefit too - it will keep your machine MUCH, MUCH cleaner than fabric softener. In my old top-loader, I would clean out the agitator twice a year. For the last 3 years I used purely vinegar, and the inside of the agitator was a clean as a wistle. None of that yucky gunk in the middle of it. You could use a couple of drops of essential oil if you like.
This tip saves me $36 a year

Natural cleaners - there is nothing like a bit of elbow grease to save you money (and get you fitter!). Use bicarb and a little water as a paste to scrub your toilet, bath, shower and vanity. You can then use a bit of vinegar for stubborn bits. Wipe it over, and use a little vinegar to make it sparkle AND to disinfect. You can by bicarb in bulk from a lot of farm supplies places.
I think I save about $5 a month on cleaners using this tip, or $60 a year.

To freshen up a drain - don't use draino! It's not good for the environment, OR your wallet. Put about 1/4 cup of bicarb down the drain in question. Follow with a cup of vinegar, and let it sit for 20 minutes. Follow with a full, freshly boiled jug of water. No more smells! I use this regularly in the kitchen.
Probably saves me about $4 a year on draino.

Shop around - for washing powder and cleaners.
- I still use Windex for my mirrors, and I won't use the cheaper ones, as they streak. I bought a bulk, 5 litre container from BigW for about $11. That should last me a good year or two! As opposed to buying individual 750ml containers for around $4 on special (if you're lucky). That's a $15 saving! Around $5 a year.
- Washing powder, don't pay more than you have to! I often keep aside $20 a week for specials, especially washing powder or bulk buys.
- You don't have to compromise on your favourite toilet paper, but shop around! I bought some fabulous 3 ply toilet paper (a good 250 sheets, not a skimpy 180 sheets that some sell), $14 for 32 rolls, or 43c a roll. Not as cheap as some that you can get for 33c a roll, but they often have a smaller number of sheets on them too. We go through about 5 rolls a week, and it might only be 10c savings per roll (probably more if you payed for full price Sorbent or Kleenex!), but that's still $26 a year saved on toilet paper. For your bottom!