Money – Fixing fiscal holes

As I write this edition of Money, the country is about to go to the polls and vote for who should run the country for the next three years. I can’t remember a campaign in the past 20 years or so that has been fixated on just one or two key issues.

Where has the debate gone on crime, policing, the Resource Management Act, education, health, trade, defence and so on? The politicking this time round seems to have been focused on charging farmers for water, and the fiscal hole in various political parties budgets.

Setting a budget for a country is not much different from setting your own personal budget.

At the end of the day it’s just plain and simple mathematics. If you earn less than you spend, you have a deficit. If you earn more than you spend, then you have a surplus. Setting a budget is about estimating how much you will earn in income and from what sources. It’s also about how much you will assign to each category of spending.
Get any of these wrong and you may find you have a fiscal hole. So when was the last time you checked whether you may be headed for a fiscal hole with your own personal expenses? When was the last time you analysed where some savings might be made? When was the last time you reviewed your situation and looked at putting some changes in place and reviewed  where you spend your money?

The easiest way to do this is to write down what you think you spend your money on each week, under headings like mortgage/rent, petrol, car expenses, power, phone, rates, insurance, food, drink, Sky, internet and so forth. Then grab your last three months’ worth of bank statements,  look at them closely, and see how much you actually spent on each of those things. You may get a surprise. I call it, “Where does that money actually go?” I firmly believe that you need to go through this process before you can implement any sort of budget. You need to understand where you are spending the money before you can make any changes to your spending habits.

Once you know where the money goes and understand your own habits, then you can make changes and implement a personal budget that will work for you. Without this discovery process, a budget is a budget without purpose. Have a go. You may just find your own budget hole! Some great information and tools to help with budgeting can be found at sorted.org.nz/Budgeting.

by Grant Clifton, Countrywise Financial
www.countrywise.co.nz