Tag Archives: Budget

Borrowing for Holidays

As we head towards the silly season after a long year of hard work, a holiday is something we all desire. However what can provide us with a few weeks of absolute bliss, can also end up costing a fortune over the long term if we don’t fund it right.

 

The best way to fund a holiday is of course through your savings. It’s what happens when you don’t have any savings and you decide to borrow to fund your holiday is where things can get messy.

 

The worst way to fund a holiday would be through a credit card as it has the highest amount of interest payable.

 

Based on a borrowed amount of $5,000 and an interest rate of 14.99%, if you paid the minimum amount each month, it would take you over 23 years and 10 months to pay it back with a total cost of the holiday of $12,018. More than twice what the actual holiday cost!

 

 

 

 

 

 

 

 

Source: MoneySmart.gov.au

 

By making increased payments of $200 per month, the amount would be paid off in 2 and a half years and would cost you $5,942. Keep in mind however that yes, you’ve saved $6,077 over the long term by paying off more than the minimum required, however even still the holiday is costing you nearly 20% more than the actual cost of the holiday.

 

With larger overseas holidays the numbers are even worse as the more you borrow, the more likely you are to be making the minimum monthly repayments as that is most likely all you can afford. That $20,000 holiday can quickly become a $40,000 holiday. You’ve effectively paid for 2 holidays but only received 1.

 

Another tempting option is to redraw on the home loan for your holiday as the interest rates are a lot cheaper. The below analysis shows the cost of borrowing $20,000 at 5.50% over 20 years.

 

 

 

 

 

 

 

 

 

 

Source: MoneySmart.gov.au

 

While the minimum payment will take you 19 ½ years to pay off, by paying approximately twice the minimum amount, you reduce the term of the loan by nearly 13 years and save approximately $9,500 but even then it will take you nearly 7 years to pay off your holiday, long after most of the memories have faded.

 

We all enjoy holidays and while it can be tempting to borrow money to fund them, a much better alternative is to plan ahead and save money before you go on holiday. If you haven’t yet saved up enough to fund your holiday, why not try some alternatives such as staying home and doing some day trips over summer, a cheap camping trip, delaying your holiday until less peak (and therefore cheaper) times of the year or even skipping this year and going on holiday next year when you can afford it.

 

Over the long term, using your savings rather than borrowing will enable you to go on holidays more frequently. At JBS it’s not only about saving for retirement, we also help you save for your holidays.

 

– Liam Rutty –

 


Saving on a Tight Budget

With the holidays fast approaching, it’s time to start to consider how you will fund your holidays / shopping / all-round fun. After all, the summer months are a great time and you definitely want to show your loved ones how much you care, but breaking the bank isn’t an option.

 

Saving on a tight budget can be quite difficult. To ensure you reach your holiday saving goals it is important to start saving early on. Another key to success is to set a concrete and achievable goal for yourself, and decide how exactly you will achieve that goal.

 

Perhaps your goal is to purchase gifts for all of your children, or fund a nice holiday away. Whatever it is, firstly determine the total cost. Break the total down by how many weeks you have left to save, and figure out where you can trim your budget to set that amount aside each week.

 

Some of the best areas to cut your budget include:

 

No more buying coffee or eating out — You’ll be surprised how much you can save by doing this.

 

Foxtel – Replace TV-watching with reading, cooking, games with your family, or other fun-yet-free activities. Take advantage of the warmer weather outside (when it decides to arrive).

 

High Interest Bank Account – Put any savings / loose change etc into a high interest bank account and save regularly. Having a separate bank account makes it more difficult to touch until you really need it (like for holidays).

 

And just as important, find ways to motivate yourself to keep saving.

 

It’s easy to become discouraged when your savings aren’t growing as fast as you would like, so it’s important to find ways to motivate yourself to keep saving.

 

I personally like to think about what it is exactly I am saving for and what I am achieving every time I deposit some money into the savings account. For example, if we are saving for a trip to Thailand and our travel budget is $100 a day, then every time I save $100 I know that’s one day of our holiday I have just paid for. Simple, but very effective.

 

Saving money and being thrifty isn’t fun but remember the end product will be! When you are lazing on the beach at your desired location, visiting Disneyland, or camping at your favourite spot, there is no doubt that you will be glad you saved every cent!

 

Make a commitment now to plan ahead, and it is very likely those savings will lead to a fun-filled time over summer.


Spring Clean Your Finances

Spring is a great time to give your finances a once over to see how those goals you set back in January are tracking. Reviewing your financial situation, starting afresh this spring and making sure you aren’t spending more money than you need to.

 

Below are a few tips to help organise and freshen up your finances:

 

Start with a Budget: if you haven’t tracked your spending for a while, it is likely that your income and expenses have changed. There is potential for you to save money by simply making a few small adjustments.

 

Automatic payments: everyone has been guilty of not paying a bill on time and this often incurs additional fees. Automatic payments could be extremely beneficial and scheduling a direct debit is one way to avoid these extra fees especially for regular payments like utilities.

 

Check your bank statements: running your eyes over your monthly bank statements for mystery charges. By doing this you may come across charges that are not yours or old subscriptions that you may have forgotten about.

 

Eliminate non-essential items: small inexpensive items add up over a month. If you didn’t purchase that morning coffee or afternoon snack every day you could save yourself over $1,000 a year. Look for cheaper alternatives – if you can’t leave the house in the morning without your coffee, purchase an eco-coffee cup and start making your coffee at home to take to work.

 

Protect what you can’t afford to lose: If something is important and you can’t afford to lose it – it needs to be protected. Your income is imperative to your financial freedom, you need to ensure it’s adequately protected.

 

You work hard for your money, so make it work for you. Creating a budget and monitoring your expenses doesn’t mean you miss out on all the fun stuff. It’s about knowing where your money is going so you stay in control.

 

If you struggle to stick to your budget or your financial situation is becoming a bit overwhelming, JBS has a program that can help give your finances that spring clean feeling. Contact us today to discuss how Cash Coach can help you.

 


Keeping momentum with your savings

We’ve just passed the first quarter of the year and it’s also this time of the year that you may begin to see some of your New Year’s resolutions start to lose momentum. More specifically we’ll look at your savings goal and tips on how to ensure you maintain the momentum and consistently save throughout the year. Often the beginning of the year is when you look to commence a New Year’s resolution. One common New Year’s resolution is to come up with a savings goal. The issue however is that the momentum starts to slow down after a couple of months into the year. Here are some tips, which may assist you in ensuring you maintain the momentum and consistently save each month.

 

Use technology as it’s readily available now
One of the most common factors that prevent consistent savings is the tedious process of having to keep track of all the income and expenses from day to day. Having to remember what that $50 you withdrew the other week was for, or remembering to retain all the receipts from last month, so you can register the amounts can become very tiresome, very quickly. Luckily we now have technology to assist us in keeping track of all your income and expenses and programs which are able to link all your bank accounts and credits cards.  This means after the initial set up of the accounts, all you have to do is spend between 5 – 10 minutes each week checking your income and expenses online. You can even download an app to your phone, so you could categorise your expense and review your cash flow anywhere. Having a simple method of tracking your income and expenses will assist you in consistently reaching your savings goals.

 

Simplify expenses and income details
Another common mistake we see is having too many categories in your budget. In your expenses section you may have a category for fruit and veg, then another category for groceries and perhaps even another category for meat. Ultimately you could just bundle all these expenses together into groceries and reduce the amount of categories under expenses. Furthermore, consistently recording certain expenses the same each month / week is also crucial. This means do not record the costs of your fruit and veg as groceries one week and then the next week record it as shopping.  The same applies to your income. If you have income derived from several jobs, you could simply categorize all the income as salary, instead of recording each income individually. Having fewer categories will make it easier for you to analyse and compare your income and expenses from time to time.

 

Turn your savings goal into your lifestyle
One of the most important reasons why you should stick to your savings goal is that once you’ve consistently saved for a period of time, you will automatically change your daily spending habits. When you initially start to review your expenditure, it will feel very daunting and painful knowing you can’t buy that new phone that’s been released as it means you won’t reach your savings goal for the month. However over time you’ll find it becomes easier and easier to manage all your spending. This means that eventually you won’t even think of the savings plan as a painful task but rather something you just do naturally. The trick is to stay consistent each month.

 

Never lose sight of your original goal (Have a Cash Coach on your side)
Whether it’s to purchase a new car, your first home, or save for the next family holiday, we generally start a savings plan with a specific goal in mind. The issue arises when motivation starts to lack and our vision of the original goal starts to blur. There is also the issue of temptation, knowing that there’s now a certain amount saved up, it’s very tempting to make impulse purchases on things we don’t need. The important tip to remember is to never lose sight of your original goal and keep yourself disciplined and accountable in order to reach that goal. This may mean you get your partner, family member or friend to keep you accountable. Even better is to have a financial adviser in your corner. Similar to having a personal trainer at the gym, having a financial adviser on your side means you receive that additional support in order to achieve your savings goals.

 

Here at JBS we have a Cash Coach program, which assist clients in tracking their income and spending every day. More importantly JBS acts as a coach and will evaluate your performance each month, to ensure you’re still on track to meet your goal. If you’re thinking about starting a savings plan or just need someone in your corner to help you save, JBS can assist.

 

– Andy Lay –