What to do if there's a tiger in your bathroom

With payWave, BPAY and more credit card offers than you can shake an EFTPOS terminal at, it’s easy to over-indulge during the silly season and lose track of your spending.

And while more than a month has already passed in 2017, if you’re like a lot of Australians you could still be suffering the after-effects of your Christmas / New Year hangover.

Just like Phil, Stu and Alan in the movie of the same name, you may only just be waking up to the fact that things got a little bit wild and now there’s a tiger in your bathroom – or, in your case, an unexpected level of debt on your credit cards.

It’s a natural reaction to freak out a little as you wonder how exactly things got so far off track.

But thankfully, getting your cash flow back under control is far easier than trying to figure out how to get a tiger back into its cage.

To learn how to tame the wild beast that is your budget, make sure you look out for my newsletter in your inbox each fortnight as I’ve compiled my top five tips for keeping your cash flow under control.

This week we’ll start with one of the simplest – but most often neglected – steps needed to help find a cure for your financial hangover.

1. Know Your Numbers

Balancing your budget is crucial if you don’t want to get yourself into serious financial trouble.

But taking the time to sit down and write out just what it costs to be you is something many people avoid.

The key to the process is to be organised; make sure you have everything you need before you start including bills for yearly expenses, bank and credit card statements and even your last few weeks’ worth of supermarket receipts so you can work out your average grocery spend.

It can be very tempting to give up halfway in if you find you don’t have the numbers you need at your fingertips.

Key expenses to identify and add to your budget document include:

• Mortgage / rent payments and other property-related items such as rates and insurance.
• Car loan repayments plus other motor vehicle running costs, i.e. fuel, service costs, insurance, registration etc.
• The cost of your utilities, i.e. water, electricity, gas.
• Internet and phone expenses.
• Food and grocery bills.
• Childcare, school fees and children’s sporting costs.
• Ongoing subscriptions, e.g. pay television services, newspapers, magazines, music streaming sites, gym membership etc.
• Health insurance.

This isn’t an exhaustive list (although you may be fighting the urge to take a nap after reading it), but going through your credit card and bank statements may help you identify other regular expenses you have missed.

List all your regular expenses (breaking down the monthly or annual bills into weekly figures) and then add up the total to find out how much your lifestyle actually costs.

The scary part comes when you compare this figure to your weekly income – hopefully the latter is larger than the former, especially as this list doesn’t take into account miscellaneous costs such as that cup of coffee on your way to work each day!

Consider opening a separate bank account and depositing a certain amount from your weekly income (or fortnight / month etc. depending on when you get paid) to ensure you have enough to cover the the more permanent expenses identified in your budget (mortgage, insurances etc.) when they fall due.

If you want to take your budgeting to the next level, try making a record of all the miscellaneous purchases you make during a two week period – it’s amazing how quickly these things add up and how much of a black hole they can create in your budget!

This will then allow you to identify your main areas of “wastage” and some potentially simple sources of saving.

In the next couple of issues I’ll look at how you can reduce some of your major ongoing expenses – and what to do with the extra money this puts in your pocket!