Did you know, business owners and individuals are making the same crucial mistake.
They are failing to set a budget.
Did you know:
- Victorian residents’ weekly household spend is, on average $1,430 per week, which works out to be over $74,360 per year.
- The average household income in Victoria is just under $73,800 per year.
- This means the average Victoria resident spends several hundred dollars more than they earn each year.
Did you know only around a third of us keep a household budget, but almost 50% of Australian households are anxious about their current financial well-being?
Most people who budget aren’t as worried as they know where their money is going and how they’ll pay expenses. Unfortunately, based on the numbers, we DO often spend more than we earn, which leaves us in a bind in an emergency.
Personal budgeting allows a clear understanding of financial circumstances, which is imperative when considering business budgeting.
Put simple: if your business doesn’t have money, you don’t get paid.
Given budgeting is so important for peace of mind and financial security, it is surprising more of us don’t keep one. The excuses we hear most from clients are, “ít’s too difficult,” or, “it’s not really necessary; I have the information in my head.”
Budgeting allows you to forward plan and cultivate your wealth. It gives you clear boundaries (including factoring the ‘splurge factor’) and brings all the benefits of compound interest (our favourite kind of interest – we are accountants after all).
Creating a budget is easier than you’d think, though it does take a little time to set up and maintain. The process is similar for both individuals and businesses. If you want an objective eye or just don’t feel comfortable with the numbers, your Melbourne accountant or financial advisors at Scott Partners are happy to work with you to create a realistic budget.
Here’s our easy guide to creating a budget:
- The first step in any budget is to look at where you’ve been spending money. Your bank or credit card statement is a good place to start, or you can keep a spending diary for a month.
- When you have a month’s worth of data, analyse the information.
- Create categories (mortgage, rent, groceries, utilities, vehicles, insurances, leisure activities etc).
- Itemise which costs are fixed, and what costs are variable.
- Plan out your spending. First, add in your fixed costs, then add in the variables.
Voila! There is your monthly budget.
If the data shows you have been spending $70 a week on coffee at work, consider bringing coffee from home, or investing in a cheap coffee machine for your office, trust us, the savings will add up. It’s worth looking around for better insurance quotes too, and it’s also worth re-financing to consolidate your loans, to bring your weekly outgoings down. We recommend you keep your savings in a separate account to reduce the chances of spending it and make sure you deposit into this account regularly. Remember compound interest? This is where it works its magic!
The most important part is keeping on track and making sure you stick to your planned budget.
Your business and personal finances are important to your future and with a little planning, you’ll start cultivating your wealth and find yourself on the road to prosperity.
If you need some guidance on creating a budget, call Scott Partners today.