How to get a broken personal budget back on track

LIFE’S little luxuries are an important part of happiness so don’t slash them from your household budget or you’ll be doomed to fail.

How to afford a little luxury

If your personal budget is in bad shape, there are ways to clean it up — but cutting out your favourite luxuries should not be part of the plan.

A household budget - much like a Government budget - can turn sour over several months if people are not realistic about their spending.

But bouncing back can be a quick process if people focus on the big household expenses and develop new habits, says LifeSherpa founder Vince Scully.

“Don’t beat yourself up, start fresh, stop making it worse, but keep things that you truly love. If you are cutting out stuff that you really love, you are not going to sustain it,” Scully says.

If coffee and cake make you happy, don’t give them up. Instead aim to trim spending on big expensive bills such as utilities, he says.

“By changing electricity provider or switching off the lights at night you can save more — and that’s one decision rather than 365 decisions.”

BUDGET GEM

Scully has created a PEARL system that groups spending in five categories:

POSTPONE recurring expenses such as haircuts, dentist check-ups or even car upgrades;

ELIMINATE spending that you don’t use such as under utilised memberships and subscriptions;

AVOID things that often cause cost blowouts such as drinks at the pub or clothes-buying sprees;

REDUCE how much you spend on common money-wasters such as grocery shopping and transport;

LOVE to spend money on the things that are most important to you, whether luxury cosmetics, travel or good food and wine. “Keep what you save for the things you love. If you want to make your budget sustainable, these are your most important expenses,” Scully says.

FIND out how to save

If coffee and cake make you happy then factor them into your houshold budget, says Vince Scully. Picture: Braden Fastier.

CUT THE CARDS

Nettina Baressi, founder of money mentoring program BudgetWorx, says good ways to get a budget back on track include switching your bills to direct debit payments and avoiding the use of credit and debit cards.

“Lots of people are not closely monitoring their spending. Cards are so accessible, even if they’re debit cards, and people aren’t tracking what they are doing,” she says.

“Go back to basics and identify your vision and goals.”

Baressi also believes in not giving up all the luxuries. “Try to be more positive and reward yourself. If you are under budget one week, you can splurge the next week,” she says.

There are plenty of budgeting and spending tools available to help consumers track spending and it’s important to learn how to use them, Baressi says.

“Be strong-minded and say ‘this is the way I’m going to operate my household’, and you will get results.”