Families Facing Financial 'Crisis' Point
Wilson Luna
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Do you have ‘enough’ money? It can be a tough question to answer, and with prices on the rise, many families now feel less able to answer ‘yes’. But by making some changes to your spending habits, you can get more from your money and feel the squeeze a whole lot less!
When I was young I thought that money was the most important thing in life; now that I am old I know that it is.
– Oscar Wilde
Now there’s a sentiment most of us could agree with! All right, money may not be the MOST important thing, but having enough of it is pretty vital to having peace of mind and security. And with the cost of everything from electricity to fruit and vegetables on the rise, now is one of those times when it would really be nice to have just a little bit more!
To be more serious, recent figures show that over three quarters of families will have to cut back to meet the soaring expenses 2011 is expected to bring. A Queensland-based survey indicated that 79 per cent of families are struggling financially and considering cutting out basic necessities to get by, and it’s hard to imagine that circumstances are drastically different in other parts of the country.
According to the ABS Analytical Living Cost Index, the pressure felt by employee households isn’t unfounded – the Index again increased faster than CPI for the December 2010 quarter, and mortgage interest rates, which are not included in the Index, also recorded a ‘significant increase’, making the Reserve Bank’s decision to hold interest rates for the first quarter of 2011 a welcome relief for families. Unfortunately, while this is good news for now, it isn’t a long-term solution to the kinds of money problems many families are facing.
Keeping interest rates steady provides short-term respite, but this is really just a bandaid – if you couldn’t afford increased mortgage payments this quarter it’s unlikely that you’re going to be in a better position to afford them next time around. If your family is facing a money crisis, the only sustainable solution is to start doing things differently financially.
If you think you need some help budgeting (or if you’ve been afraid to create one until now!), and you’re worried about making ends meet as prices go up, now is the perfect time to start taking control of your financial situation and employing some simple ideas to help your family get ahead:
Track your cash
59 per cent of people surveyed admitted spending well beyond their means. One of the major reasons for this is that many people don’t have a realistic idea of exactly how much they spend. Track your spending for a week, see exactly where your money’s going and find out how much cash is ‘wasted’ each week. Some of this may be ‘luxury’ purchases that you can cut out of your budget altogether, but remember also to look at where you spend your money – and where you get it! You can incur extra costs by getting money from another bank’s ATM or by picking up forgotten items at expensive convenience stores.
Have a plan
Identify all your annual expenses, use your spending tracker to calculate a realistic cost for regular expenses and add them together and break the total down into monthly amounts to compare with your income. Find out whether your expenses are in the ‘black’ (good), or in the ‘red’ (could improve!), and start taking steps to put your finances where you want them to be.
Be brutal
Divide expenses into ‘essential’ and ‘non-essential’. Decrease essential expenses where you can by searching for better prices and using things like appliances and mobile phones more efficiently, and eliminate as many non-essential expenses as possible to create a gap between your income and spending. Be brutal with this – making tough decisions now will pay off in the future.
Once you’ve sorted out what you’re spending, have a think about how you spend it. As a nation we owe over $49 billion in credit debt, and we’re paying interest on over $35 billion of it. So cut up those credit cards! If you really need a credit card, choose a low interest one and keep it in a drawer for emergencies only – and stick to debit cards for everything else.
Financial security is vital to the wellbeing of your family – so start taking steps to create a solid foundation right now. Oscar Wilde may have famously chosen to ‘die beyond his means’, but for most of us, living a great, happy life without any money problems is a much more appealing goal – so look at things a little differently, and you’ll be surprised at the results!
Want more help budgeting? Check out our budget spreadsheet templates and money worksheets here.
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Tags: money problems, money crisis, help budgeting, budget spreadsheet, money worksheets
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Wilson Luna is an author, wealth adviser and founder of Your Family Your Money. Your Family Your Money’s goal is to simplify traditionally complex financial strategies, demystify financial jargon and debunk common financial myths, becoming every family’s first stop for financial advice, information and inspiration.
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