Mind the gap

On the subject of budgeting again....I spoke recently in a group of business women and we touched on budgeting which is not my jurisdiction but all the same it evoked responses. I talk about budgeting as understanding so you can make conscious choices about your spending, so I talk about going through your bank statements methodically to understand what it is you spend your money on. Invariably there’s a column that stands out as an issue, it might be the entertainment column, or clothing or too much spent too often on treats – or it just might be the unknown, as in you literally don’t know where it goes…a gap if you will.

In the conversation after we discussed a workshop where participants were asked to do just this exercise and disclose how much their “unknown” column, the gap in their budget, amounted to. The answers were in the tens of thousands of dollars a year. It doesn’t take much to realise that taking control of this can make a huge difference in your life.

The gap is life, I get it. And you have to live, life is short. The point is to acknowledge it and make conscious informed choices.

What worries me most is in some cases I know the gap is more than you can afford. If the balance on your credit card is growing every year – you’re spending more than you earn. And what is worse still is that to manage this takes more and more income to cover the increasing interest bill, which effectively makes the gap larger and larger.

So what can you do about it if the gap is out of control?

Realistically there are only two answers – reduce your costs or increase your income. Reducing your costs may mean reassessing your loans, but more likely its looking at your expenses and tightening the belt for at least a time.

But what if the gap is affordable but you now you know it you want to put it to better effect – redirect this lost money consciously into saving or even making you money – pay extra into your loan to save interest or start investing, if your gap is a few hundred dollars a month what can this do in a managed fund? Food for thought.

Article for the Western Weekender https://issuu.com/weekenderpenrith/docs/property23dec/16

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