Budget spending: can you balance your household better than Jim?

Being a treasurer is tricky, for personal household budgets too, and it’s worth thinking about the expenses you’d cut if you were Jim Chalmers. Take our poll.

I’m getting locked up this week, and I like it.

Not in a Shawshank Redemption way or a 50 Shades of Grey way, but in a “wow, they’re some bloody big numbers” way.

As a numbers nerd, I’ll happily join hundreds of other journalists and finance specialists across Australia in federal budget lockups.

During a delightful seven hours we pore through pages of pages of budget figures, forecasts and government policies, so when Treasurer Jim Chalmers hands down his budget on Tuesday night, the media is ready to explain to Australians how it will affect their finances.

My favourite part? The pictures! Or more accurately, the pie charts that show Australia’s finances in simple form: money coming in and money going out.

While this shows hundreds of billions of bucks heading in and out the door, households too should know their ins and outs – albeit with their much smaller numbers.

Understanding what you are earning and what you are spending is one of the most important pieces of personal financial information you can collect, and the starting point of setting your own budget.

Armed with this knowledge, people can then look for ways to cut back on unnecessary expenses or divert more money to things they love rather than longstanding spending habits that don’t bring much joy.

The federal budget’s pie charts a year ago showed the biggest revenue source was personal income tax at $326bn, followed by company tax at $134bn and sales tax of $91.1bn. On the spending front, 35 per cent of our money went to social security and welfare, 16.9 per cent to health, 7.1 per cent to education and 5.9 per cent to defence.

On a household level, your ins will be wages, government payments and perhaps some bank interest, share dividends or rental property income. The outs very dramatically and the big ones are usually mortgages or rent, groceries, insurance, education, energy, fuel and entertainment.

The trick is trying to balance it all and have some left over for savings.

It’s a tough trick for the government too, and one it has often failed by pushing Australia further into debt. Households don’t have the luxury of continually running budgets in deficit because we don’t have the ability to tax the public to pay our bills.

If you’re not sure about what to cut back on in your own spending, try being the Treasurer.

Years ago, we asked readers to design their own balanced federal budget, which included increasing or cutting back key expenses. At the time readers put more money into health and education while slashing the defence and welfare budgets.

Now, things may be different, especially in defence as wars rage overseas and threaten to spread to more countries. It’s a good exercise to think about, because making big financial decisions always leads to winners and losers.

What would you cut back in the federal budget? After 25 years of covering them, I still wrestle with this. That’s because budgets make us think about what’s important.

Easy costs to cut include coffees, takeaway meals, entertainment. But be wary about cutting too much. Don’t suck all the fun out of life, especially when there are other ways to make household budget savings.

Consider reviewing your mortgage rates and fees, checking insurance premiums and shopping around for a better deal, studying supermarket savings strategies and understanding the petrol price cycle in your city.

Save money and still enjoy some luxuries? That’s a budget anyone would love to have.

Originally published as Budget spending: can you balance your household better than Jim?