We have made it through another holiday season and hopefully so did your bank account. With the start of a new year, it’s a perfect time to review or do a new budget.
The best place to start when creating a budget, is with your bank statements. Look at a minimum of 3 months statements to give you a good indication of not only how much money you are spending, but also how much income you have coming in.
Start with the income. Take in to account all streams of income; ie. Wages, pensions, government credits, cash jobs, investments, etc. It is very important that you have more income than expenses, otherwise you are just building debt.
Now that you know how much money you have to spend, review how you spend it.
It is a good idea to indicate which expenses are “needs” and which ones are “wants”. Then you can grade the “wants” by how much joy they bring to your life. The ones you grade the lowest are probably the best place to start cutting back.
Now take control of your money. Be the boss and tell it where to go. Allocate how much you expect to spend on each expense, based on your actual spending history. Don’t forget to include annual or irregular expenses like vacations, Christmas, a new car, home improvements, retirement savings and the inevitable unexpected expenses. Make sure you include debt repayment for credit cards and lines of credit, if you carry balances.
If the budget seems too tight or you just can’t get it to balance, start with the smaller variable expenses (your “wants”) to see if there are ways to cut costs, but don’t forget the big expenses too. For most the largest monthly expense is their mortgage. If things are just too tight there may be a way that your mortgage could help. It may be time to do a consolidation with your mortgage to reduce your overall monthly payments. And vice versa, if you find some extra wiggle room in the budget, think about taking advantage of your mortgage prepayment options. Making lump sum payments or increasing your regular payment can make a significant impact on how much overall interest you pay and how quickly you pay it off.
Now is the perfect time to do a mortgage review. We will also assist with and review your budget and offer tips for success.
We want to ensure that your mortgage is working for you and you aren’t just working for your mortgage.
Please contact us to book your mortgage review.
For more tips on creating a budget read our previous blogs; Budget Review & 5 Mistakes Most Often Made When Doing a Budget