Family Budgeting Expectations vs Reality

One of our clients recently told us how they were feeling frustrated with their family budget. They earn a comfortable, discretionary income which, in theory, should see them saving quite a bit of money for their goal of building a home. However, with their spending habits coupled with one-off expenses, they were merely covering costs and not adding to their savings.

Discretionary income (not to be confused with a disposable income) is the income left in your pocket after having paid tax AND necessities. A family’s discretionary income can actually cause more harm than good because it sees the family enter a spending carousel whereby, they get a spending mindset rather than a saving mindset. It is like they think, ‘Well, I have the money, so I may as well spend it.’ For a family, like the above-mentioned client, the discretionary income carousel can be very difficult to get off and can see them become frustrated when big goals or expenses come up.

Our client isn’t alone with the spending mindset as it is a common problem for many Australian families. In fact, as of December 2018, the average household income was $2,242 with the average household expenditure (for a family of two adults and two children) fluctuating between $1,800 and $2,000. That $200 to $400 can make a big difference to a family’s savings.

But, unfortunately, when you throw in the unexpected expenses like car registrations, school fee increases, sporting costs or medical expenses, it is easy to see where the extra income gets lost. So, what can you do to get off this frustrating merry-go-round?

It might sound simple, and boring, but the best piece of advice is to budget. Start by compiling a list of your everyday expenses like household running costs. Then identify where you spend your extra money and whether it is on your needs versus your wants. We touched on this in our last article. The next step is to think longer by listing your regular and semi-regular costs. These are things like monthly bills, car services, car registration, annual pet vet-checks etc. 

ASIC has a very useful Budget Planner which can help you calculate and balance your income and costs. However, as useful as this tool is, it will only keep you accountable for as long as you use it.

A Spending Planner, on the other hand, is available every day to keep you accountable. Whether you sign up to either our 7 month Spending Plan Program or our 6 week Financial Acceleration Program, our Spending Planners will be in regular contact with you to answer your spending/budgeting questions and to help you tighten up your spending and increase your savings. Basically, we will act like your spending conscience sitting on your shoulder making you decide whether you really need or just want those new pairs of shoes!

 

Start Saving with a Spending Plan!

So, other than frustration, what do you have to lose? Get off the carousel and call Premier Spending Planners today.

Get Started Today!