Budget your way to success
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Budget your way to success
Topics in this section:
Know your spending habits.
Add up all your income and expenses to see how much you realistically need each week for different things, where you are over-spending and can cut back. One wicked website that’ll do this for you is www.sorted.org.nz. Even if you want to do the maths yourself, have a look at the site – they list expenses you might not think to include.
Set up an account for bills.
Once you have worked out how much money you need to put aside to cover all your bills (including rent, power, water, phone and internet), set up a bills account at your bank. You can organise for your bank to automatically put an amount of money you choose into this bills account every time you get paid. That way, you don’t have to remember to transfer the money every payday yourself, and you know that your bills will always be taken care of. For this account, don’t get an EFTPOS card, since you can set up an automatic payment, where the money gets transferred out automatically.
Set up an account for unexpected costs.
The real stress of money comes from those extra surprise costs, like car repairs, A & E bills, medicines, computer and phone repairs or clothing items for a job interview or one-off occasion. Having a separate account for these expenses too can be really helpful. To make sure there is money in this account, think about where you can cut back from. For example, how much do you put aside for buying your lunch or buying takeaways? Can you instead make your lunches and cook dinners more often and instead, put this money away each pay. How much money do you put aside for the movies? Can you instead watch more d.v.d’s?
Don’t buy into the pressure – literally.
More than ever, we’re under pressure to have the “right” stuff. Finance companies take advantage of this pressure and offer to “help” by lending you as much money as you want, when you want it. This may seem like a sweet deal, but as they say, if it sounds too good to be true, it probably is!
Know what you’re really getting into.
Finance companies and hire purchase deals make money by having high interest rates. That means that you they charge you a certain percentage of how much money you borrowed or your purchase price on top of your borrowing. So for example, an interest rate of 25% per annum (year) when you borrowed $1000 would be $250 per year on top of that $1000 until it’s paid back. Minimum payments will hardly cover the interest, meaning you’ll be paying off your purchase for years and pay stacks more than the ticket price.
Separate “want” from “need”.
Do you really need it, or do you just want it without having to wait? Think carefully before committing to years of debt. The constant and expensive repayments could stop you from doing fun things, saving and buying other stuff you actually do need in the future.
What are the alternatives?
At the very least, go to your bank and try to get a bank loan first. Banks often have deals for financially strapped students needing cash for stuff like a bond when moving into a new flat at short notice. If the bank does turn you down, it might be because they think you’ll struggle with the payments – so consider saving for something if you don’t need it right away. Even saving half and borrowing half is a better alternative.
Some companies will also offer interest free periods, normally between one and three years. If you are able to pay off your item within this interest free period, then these deals are also worth looking at. A word of warning – be sure you know the interest rate in case you haven’t paid off the total by the end of the interest-free period. You also need to check the fine print and ask some questions – some ‘deals’ leave you getting charged interest right back to the purchase date at the end of the interest free period.