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Budgeting tips for survival

Published: Sunday | December 6, 2009

Could you be playing ostrich with regard to your spending habits? Making a budget, possibly for one-yearperiods, is a good reality check.

It can help you to see clearly if your spending patterns today will land you in trouble tomorrow.

With a budget as a tool of survival, and, with surgical cuts when necessary, individuals can get the space they need to breathe when disposable income grows less.

For those who are using lines of credit, credit cards, credit-union loans, company loans and salary advances to make up monthly shortfalls, it is time to budget.

Creating a budget serves to identify and properly plan your expenses in relation to your income, life goals and objectives.

Account for even the smallest expenses and do not ignore one-time annual expenses, such as car and home insurance, says Dave Dixon, branch manager with Scotia DBG Investments Limited.

Dixon states that when one constructs a budget and the expenses are higher than income, one really should consider these three options:

1. Increase your income to cover the shortfall: This can be achieved by seeking additional employment or turning your hobby into a business.

2. Adjust your expenses to fit your budget: This could be done by identifying those expenses that can be deferred until you can afford them. For example, you can live without cable service and find some other form of entertainment that costs little or no money. Take up reading and join a book club. Library books are free, or available at cheap prices at used-books stores.

Renegotiate loans

You could also renegotiate existing bank loans and explore the options of consolidating or refinancing your loans into one debt payment.

Failure to do this early could result in a situation where you start defaulting on your loans, which may result in the repossession of assets and penalties, such as late charges or confiscation of assets.

3. Save more towards your planned purchases instead of buying on credit. You end up paying much more than if you paid cash.

Avoid hire-purchase plans when possible.

For those who are experiencing a budgeting crisis, here are some additional tips from our expert to bring expenditure in line with income and to get out of debt:

Use savings to fully pay out the higher-purchase contracts.

Stop using this line of credit and credit cards to ensure that these can be fully paid off within at least a year.

Be very disciplined and resist the urge to splurge on items that are not budgeted for and would result in increased debt.

Continue to set these goals until you are debt free and able to comfortably save between 10 per cent and 15 per cent of your income each month without touching same.

Email Dave: ddixon@scotiadbg.com.