Oily Rag Column: Budgeting by jars

It´s Budget week. The Minister of Finance will be delivering the nation´s budget for the year - that is how much the country will make and spend, and most importantly the gap (canyon!) between the two and how it is going to be bridged. Ronald Regan summed up budgeting pretty well when he said, "We don´t have a trillion-dollar debt because we haven´t taxed enough; we have a trillion-dollar debt because we spend too much."

While governments talk about million, billions and trillions, budgeting is just as important for your humble household as it is for our overweight and overbearing government.

A budget need not be complicated. Here´s a really basic oily-rag-way to budget - using jars. Divide your weekly budget up into major expense areas: food, electricity, telephone, transport and vehicle costs, mortgage or rent, clothing, medical and dental, having a bit of fun off the smell of an oily rag, and so on. Have a jar for each expense area and add two more jars - one for a rainy day fund, and another for retirement savings.

Label each jar with the expense item and the amount budgeted (e.g. telephone $15 week). Each week place in each jar the amount you have allowed yourself to spend on that area. Draw from the jar to make payments. Some payments like electricity and telephone will be made monthly, so simply let the funds accumulate until making a payment.

Any money left over should be transferred to the "rainy day" jar; or, better still, to the "retirement" jar so that one day you won´t have to live off the smell of an oily rag by necessity - you will be able to live off the investment harvest from your past savings! Here are some tips and suggestions from readers.

Tracey says, "To make budgeting easier for our family, I calculate ALL bills for the year (including car warrants, regos, insurance, rates, power, phone, etc). I then divide the full yearly amount by 52 weeks, and deposit that amount to a bills account. I have all automatic payments and direct debits set up to come out of that bills account, so you always have the money to pay the bills and you know they will be paid on time."

Sande says, "Save all change given to you at shops that is under $1. Our family of three adults has made this a habit. We use an old glass vase and all the 10, 20, and 50 cents pieces get dropped in after each shopping trip. We only dip into it if we need parking meter money. It is mounting up slowly."

Sam from Auckland has this advice: "Always include some sanity money in your budget as it means you are less likely to spend other money that you need for something else. Get this money out in cash each pay day and when it is gone it is gone - NO SWIPING!"

And Peter and Robyn have this to say about budgeting for Xmas. "We think the only way to prepare for each Xmas is to put some money away each week, fortnight or whatever and try NOT to use it during the year. It makes things so much easier and not so stressful. Put a limit on each present and stick to it. If youhaven't got the cash on handfor Xmas items then the credit card nightmarebegins and thestart of the New Year is one big nightmare! Don't go there!"

You can contract Frank and Muriel Newman via the oily rag website (www.oilyrag.co.nz) or by writing to Living off the Smell of an Oily Rag, PO Box 984, Whangarei.

* Frank and Muriel Newman are the authors of Living Off the Smell of an Oily Rag in NZ. Readers can submit their oily rag tips on-line at www.oilyrag.co.nz. The book is available from bookstores and online at www.oilyrag.co.nz.

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