Warkworth businesswoman Christine Liggins, of Simply Budget, has been giving budgeting advice for 14 years because of a passion for “messing with money, making it work and helping people”. She divulged her top 10 budget tips to Mahurangi Matters …
1. Pay frequently
Pay your bills at the same frequency that you get paid. For example, beneficiaries are paid weekly. If they pay the power bill only when it arrives then that it could mean all their benefit has gone for the week and they have no money for anything else. If the power bill comes in monthly and you get paid weekly, still make weekly payments. By paying weekly, you can manage your budget better and always have money for everything each week. Most power companies will let you pay at the frequency you want. They will look at your last 12 months of usage and divide the total cost by how frequently you want to pay. Telephone companies are not so helpful, but you can still set up an automatic payment and pay them as you get paid. If you end up paying a little more than necessary each month, after a little while you can have a “free” month.
2. Check your plans
When it comes to things like insurance, power and phones, you need to regularly check that you are on the right plan. I used to pay $90 a month to Vodafone for 300 minutes of free talk, a gig of data and a limited number of free texts. I went in to see them one day. I came out with unlimited texts, unlimited calls and 4 gig of data for $30 a month. Phone companies are helpful in finding the right plan for you if you ask them, but you have to be sure to ask. With power, you can go to powerswitch.org.nz, which will help you work out which power company and pricing plan is best for you. They make about 10,000 changes a month to keep up with all the changes that are made by the power companies. They tried to set one up for telephone lines and the internet but they could not keep up with all the changes.
3. Get on the same page
I’ve seen a few clients like this in the last three months: There are two in a relationship and both are paying household bills but neither knows what the other is doing. One might be paying the bulk of the bills and is left without money at the end of the week. They need to sit down together, itemise the household bills and fairly divide the expenses.
4. Monitor all outgoings
When people prepare a budget, they will remember to put down things like rent, power, car, insurance and even “fun”. But they tend to forget things like the WOF, the car registration and presents. Sometimes when working with clients it will take up to the second or third interview before they say, “Oh, I forgot to tell you but we do have this coming out each month.” It’s important to write down all outgoings and remember ones that might be overlooked.
5. Take free advice
There is a budget line number 0508 BUDGET. Calling that number will put you in touch with your local budget advisor. I belong to the Warkworth Wellsford Budget Service and about 20 of us volunteer for that service. People calling the budget line in our area will be referred to one of us. A lot of people think that the budget service is tied to Work and Income and you have to be a beneficiary, but that is not the case. Also consider taking the NZ Certificate in Money Management Course run by Te Wananga. There are 20 weeks of evening classes and it’s free.
6. Pay what you can
People get a telephone bill of, say, $200 and they think, ‘O my goodness, I can’t pay that’, so they don’t. But pay what you can. At least it will make the bill smaller. If you don’t pay anything, the bill will just get bigger and even more impossible to pay.
7. Check your bank statements
Look out for fraudulent use and spurious charges. I was helping one lady and noticed there was $11 a month coming out of her bank account. But we did not have that on her budget sheet. She did not know what it was, so I asked her to check. It turned out she had taken a loan out with the bank and there was an insurance cost attached to the loan. She was done paying off the loan, but they had not stopped taking the insurance payment. When she brought this to the bank’s attention, they cancelled the automatic payment and refunded the money she had overpaid. It was so much she could pay off one of her credit cards. If we see something unusual on our bank statements, we should always question it.
8. Keep it simple
I had one client with six bank accounts and her bills came out of different accounts. Every week she had to transfer money from one account to another to make sure that a bill got paid. Sometimes she would transfer the money into the wrong bank account and end up with a dishonour fee in the correct bank account. There’s nothing wrong with having multiple accounts if you can manage them. But if it’s too complicated for you, you are going to get in a mess. Keep it simple.
9. Take care with credit cards
Don’t use your credit card to withdraw cash. Once you withdraw the cash you can immediately be paying interest of around 23 per cent. Whereas if you use the card to purchase something, you will have weeks to pay it off before incurring interest. Also, be careful with balance transfers. This is where you transfer the balance of one credit card on to another credit card with a lower interest rate. The trick here is to ensure you don’t add any further debt to the card with the lower interest rate. Any debt repayments that you do make on the card will be deducted from the balance transfer first, meaning any further debt will be attracting a high interest rate, possibly for a long period, until the balance transfer debt is eliminated.
10. Plan for the future
We always forget unexpected medical, dental and optician bills. Put them in your budget. If you allocate $1000 this year for dental treatment, it’s possible you may not use it. But next year you might have a $2,000 dental bill and that money will then be available. If you lost your job today what is going to happen? Is it worth considering income protection insurance? Or would it be better to put the money you might have spent on insurance aside and build up an emergency fund for unexpected expenses? Think it through. Account for everything and plan ahead.