Solving The Budgeting Mystery

How to budget can seem like a real mystery to most. It can seem like a really difficult thing to do, but in all reality it isn't that hard if you put your mind to it and if you are determined. You have to have a reason to want to change though and in most cases that reason is to allow yourself to have something in the future that will give you pleasure and enjoyment.

Below are two case studies of people we would like you to meet and how they Solved The Mystery of Budgeting.

Sienna and Byron

Meet Sienna and Byron and see how they are going to cut down their spending by $11,100 over the next 12 months to enable them to save for their wedding next year.

Since being a member of Money Detective, Sienna and Byron have realised that it is important for them to try and reduce their expenses to enable them to build up some savings in readiness for their wedding next year. They need to save up $10,000 over the next 12 months. They have learned the differences between their fixed and optional expenses and understand that it is easier to trim down on the optional ones.

After completing their Budget Spreadsheet they have realised that a lot of their money is being spent on going to the theatre, dining at restaurants, buying clothes and flying interstate for weekends away. They also enjoy spending money on top quality groceries although, they are usually so busy they don’t get time to cook and most of the food they buy feeds the rubbish bin and not themselves.

This wedding is the most important thing for Sienna and Byron. However, to enable them to have the $10,000 required for their wedding, they have decided that they are going to cut down on some of their ‘nice to have’ expenses. Here is how they are going to do it over the next year.

Go to the theatre each quarter instead of each month.
Cost of $150 per ticket : 8 tickets instead of 24 tickets
Total saving of $2,400 a year

Eat out once a month instead of once a week
Cost of $70 for dinner : 12 dinners instead of 52 dinners
Total saving of $2,800 a year

Check out eBay for new wardrobes and save 50% on clothes
Cost of $300 a month for clothes now : 50% saving on clothes down to $150 a month
Total saving of $1,800 a year

Do one interstate trip instead of 2 over the next 12 months
Cost of $1,500 per trip : 1 interstate trip instead of 2
Total saving of $1,500 a year

Write a weekly Menu Planner and Shopping Planner and reduce current grocery cost by a goal of 20%
Cost of $250 a week for groceries now : 20% saving on groceries down to $200 a week
Total saving of $2,600 a year

When you add all of these savings up it totals $11,100!

By trimming down some of their optional expenses over the next 12 months, Sienna and Byron will be able to save a grand total of $11,100. You can see from this that they haven’t had to miss out on what they enjoy. They have just made some sacrifices to reduce the cost of some of these expenses to allow them to meet their ultimate goal of having money for their wedding.

By writing a budget and focusing on where they can trim their expenses, Sienna and Byron will be able to go into married life knowing that they paid cash for their wedding. They won’t start married life with a large personal debt that they will spend the next 7 – 10 years paying off.

Cathy and Rod

Meet Cathy and Rod who want to save $5,000 for a fly drive holiday to New Zealand, and see how they are prepared to make sacrifices to get there.

Cathy and Rod have never managed to make ends meet and they were in a depressed state before they started out as members of Money Detective. Cathy and Rod have now realised that there is hope and that they can manage their money. As a result of a new found belief in their abilities, they now have the drive and determination to plan a fly drive holiday to New Zealand.

It is important for them to try and reduce their expenses to enable them to build up some savings. They need to save up $5,000 over the next 12 months. They have learned the differences between their fixed and optional expenses. After completing their Budget Spreadsheet they have slashed their optional expenses sufficiently to now give them a savings surplus of $250 per month, however if they save this over the next 12 months they will only have $3,000. So, they now need to look back through their Budget Spreadsheet to see what other areas they can trim down on.

They need to build up another $2,000. They look at their fixed expenses (non discretionary) and find some areas they are able to cut back on. Here is how they are going to get their extra $2,000:

Cut down on the excessive use of the mobile phones by reducing cost by a goal of 15%
Cost of $250 per month now : 15% saving on mobiles phones down to $212 per month
Total saving of $450 a year

Cut out Pay TV and use Free to Air TV
Cost of $72 per month : Using Free to Air TV
Total saving of $864 a year

Have the gardener visit once a quarter instead of each month
Cost of $150 per month : 4 visits instead of 12
Total saving of $1,200 a year

Reduce electricity by turning off power points and turning off lights reducing costs by a goal of 10%
Cost of $204 per quarter now : 10% saving on electricity down to $183 per quarter
Total saving of $81 a year

When you add all of these savings up it totals $2,595!

By trimming down some of their fixed expenses over the next 12 months, Cathy and Rod will be able to save a grand total of $2,595. They are prepared to make some sacrifices such as the FoxTel TV to give them money for a holiday. They have never had a holiday overseas before and they are committed to making this work.

So by trimming a total of $3,000 from their optional expenses and $2,595 from their fixed expenses they are able to save a massive $5,595.

By writing a budget and focusing on where they can trim their fixed and optional expenses, Cathy and Rod will be able to go off on a holiday knowing that they paid cash for their trip. They won’t come back from a great trip away with a personal debt that they will spend the next 5 – 7 years paying off.