subject: Need To Meet Loan Repayments? Prepare A Budget And Take Control [print this page] There have been quite a few stories in the media of late about people who default on their loan repayments and there are often sensationalised circumstances surrounding the issue. Unfortunately, what is never reported are the hundreds of thousands of people who regularly meet their loan repayments. Setting aside unfortunate and unforeseen circumstances, most times loan defaults can be traced directly back to a lack of budgeting before taking out a loan. Having a budget, not just for a car loan, but for every aspect of the household finances is an essential tool to keep track of spending.
Budgets not just for the Financially Skilled
A budget helps identify areas where money is being wasted, and encourages people to think more carefully about their choices as consumers. For those of us who are not naturally financially minded, the whole idea of putting together a budget falls into the too hard basket. However, it doesnt have to be difficult. In fact, it can give rise to those ah ha moments where we suddenly realise why our wallets are leaking money.
For a personal budget, there is no need to use accounting or financial terminology.
A budget is simply a list of all the things on which money is spent (expenses) and a list of where the money comes from (income). Once it is put into terms ordinary people use, it doesnt seem quite so daunting. The one thing, however, that a budget must be is accurate, in order to be effective. It is pointless using guesswork figures because the final result will not reflect the persons real spending patterns.
There are budget templates available for download from the internet which makes the task easy. However, for people without computer access, a pen and paper will do just as well. Firstly, decide if the budget should be weekly, fortnightly or monthly. Keep it in line with how income is received i.e. if wages or salaries are paid weekly, the budget should be weekly, if paid fortnightly, work out a fortnightly budget, etc.
Include Everything Absolutely Everything
List all income sources including investment income, government benefits and, of course, wage or salary payments. This part is super easy, because there are usually only a few. Now make a list of all expenditure. This is usually where people get it wrong. All expenditure means just that everything. Include magazines, take away food, fares, parking fees, raffle tickets, Lotto and the other incidental items that eat away at income.
Most people, when making their first budget, list all the big ticket items such as rent or mortgage repayments, car loan Brisbane repayments, electricity, insurances, credit card payments, groceries and fuel, amongst others. They add these up, take the total away from the total income and have a figure that shows they are in good shape. Knowing that this is not the reality, they declare that budgets dont work. They do work, but only if absolutely every cent spent is included.
With a properly completed budget in front of them, people can see where they can make savings. Usually, after doing this exercise properly, they find hundreds of dollars that can be used for car loan repayments. So the next time the media reports on hard luck stories, think about the possibility that those concerned may not be defaulting on their loan if they had started with a budget. Click here for more information.
