How many times have you looked at your bank account at the end of the week, scratched your head and wondered ‘Where on earth has all that money gone?’ You think, ‘We both earn pretty good money, our house is just the same as our friends and we hardly go out so where is it all going?’ Like many people you probably decide its best to stick your head in the sand, shove the bills into a drawer, turn off the light and lay awake feeling angry and frustrated.
The truth is that budgeting, without all of the emotional stress, is really just a matter of mathematics.
Let’s use the above example of Mr and Mrs Sleepless Night. This couple has no kids and each earn $65,000. Their mortgage is $490,000 on Principal and Interest repayments for 25 years at 6.80%. They have a car loan of $20,000 at 11.99% and a credit card limit of $2,000 on which they are making minimum repayments of 5%.
If we break that down into weekly income and expenses, then add food, petrol, insurance, utilities, rates and other weekly expenses, let’s see what’s left at the end of the week.
| Net combined income | $1,974.00 | $102,648.00 |
| Weekly mortgage | -$784.19 | -$40,777.88 |
| Car repayment | -$102.44 | -$5,326.88 |
| Credit card | -$25.00 | -$1,300.00 |
| Food / takeaway | -$200.00 | -$10,400.00 |
| 2 x Petrol | -$100.00 | -$5,200.00 |
| 2 x Mobile | -$55.00 | -$2,860.00 |
| Home internet | -$10.00 | -$520.00 |
| Home phone | -$10.00 | -$520.00 |
| Health insurance | -$38.35 | -$1,994.20 |
| Home insurance | -$25.00 | -$1,300.00 |
| Rates | -$20.00 | -$1,040.00 |
| Water rates | -$15.00 | -$780.00 |
| 2 x Car rego | -$15.00 | -$780.00 |
| Gas | -$20.00 | -$1,040.00 |
| Electricity | -$25.00 | -$1,300.00 |
| Car insurance | -$23.08 | -$1,200.00 |
| Car servicing | -$23.08 | -$1,200.00 |
| Out to dinner | -$80.00 | -$4,160.00 |
| Presents | -$30.00 | -$1,560.00 |
| Holiday | -$76.92 | -$4,000.00 |
| Gym memberships | -$23.08 | -$1,200.00 |
| Hair and beauty | -$11.54 | -$600.00 |
| Clothes | -$11.54 | -$600.00 |
| Lotto | -$10.00 | -$520.00 |
| 2 x Daily coffees | -$40.00 | -$2,080.00 |
| Lunches | -$100.00 | -$5,200.00 |
| Surplus | $99.79 | $5,189.04 |
As you can see, out of their $130,000 combined income, only $99.79 is left each week, or $5,189.04 a year. This figure doesn’t take into account any unexpected expenses such as medical bills, the washing machine blowing up or needing a new engine for a car. Oh, and did someone mention that there is a new plasma coming out?
The thing that amazes me is that Mr and Mrs Sleepless Night probably have no idea that they are going to work, five days a week for 41 weeks (or over ten months of the year) JUST to make the mortgage repayment! Let’s hope that they aren’t considering any additions to the Sleepless Night family…
So what is the solution? There are a few things that could be considered:
- Consolidate all of the debt into one repayment and get rid of the credit card?
- Consider downsizing your house or car to a smaller one, or moving to a different suburb?
- Look for a better mobile deal?
- Take your own coffee and lunches instead of buying them?
- Are you in a position to earn more?
The most important thing you can do today is take your head out of the sand and start getting money savvy!
Until next time
About Ashleigh CooperAshleigh has personally helped over a thousand people to manage their daily finances and has a real understanding of how people in debt can be helped to make better financial decisions.
