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How To Budget – What My Parents Taught Me.

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My Dad's Advice On Budgeting.

Always pay yourself first because there may not be any left by the time you pay everyone else.

Dad said to open three seperate bank accounts.

Account No. 1: Pay yourself first into this account. This money should not be touched! (It could be your savings for a deposit on a house).

Account No. 2: Money to pay bills!

1. Add up all your bills for the past 12mths & then add 10% to the total.

2. Divide the total amount by the number of pays you receive per year.

3. Pay this amount into A/C No. 2 every single pay day (you will then always have the money to pay the bills.

eg. All bills for past 12mths + 10% = $4,600

You get paid weekly (52 pays a year) so divide $4,600 by 52 = $88.46

Pay $88.46 into A/C No. 2 every pay.

Account No. 3: Money for your pleasure! This is money to spend on going out for dinner, to the theatre, for presents or holidays etc.

If there's still money left in the account by the end of the week, then pay it into A/C No. 1 rather than spending it elsewhere.

OVERVIEW - To Pay Into Each Account Every Pay (for example purposes only)

Pay = $15,000 Year (Divided into the three accounts)

A/C No. 1: $7,000 Year - divided by 52wks (every pay day) = $135

A/C No. 2: $5,000 Year - divided by 52wks (every pay day) = $96

A/C No. 3: $3,000 Year - divided by 52wks (every pay day) = $57

The Benefits of Compounding Interest

For example, let's say you're paying $300 a week (every pay day) into A/C No. 1 and interest paid by the bank is 7%.

Yr1 - $300 x 52 (pays) = $15,600 + 7% interest = $16,692

Yr2 - $300 x 52 (pays) = $15,600 + $16,692 (from Yr1) + 7% interest = $34,552

Yr3 - $300 x 52 (pays) = $15,600 + $34,552 (from Yr2) + 7% interest = $53,663

Yr4 - $300 x 52 (pays) = $15,600 + $53,663 (from Yr3) + 7% interest = $74,111

Yr5 - $300 x 52 (pays) = $15,600 + $74,111 (from Yr4) + 7% interest = $95,991

Yr6 - $300 x 52 (pays) = $15,600 + $95,991 (from Yr5) + 7% interest = $119,402

Subjects Never To Discuss With Friends (If you want to stay friends)

My Father Taught Me - If you want to stay friends then never discuss the following subjects.

We all have our own individual views on these subjects, which should be respected that that's your view (whether we agree or not), but there's no need to justify or convince others of that view.

Here is the list:

Never discuss:

1. Politics;

2. Religion; or

3. Finance.

A good reply to questions on any of these subjects could be "Why do you ask?", "Why do you need to know?" or "I prefer to abide by my parents advice and not discuss this subject.".

My Dad's Sayings!

If you don't have the money in the bank to buy it, then don't!

Live within your means, don't spend what you don't have.

You shouldn't have credit card debt if you only buy what you can afford.

Don't impulsive buy. No matter how much you want to buy something, get in the habit of promising to yourself to return the next day to purchase it.

Do I need it or do I want it?

Credit Card Debt

If you buy dinner tonight for $100 and charge it to your credit card, and if you don't pay the total amount due at the end of the month when your credit card account is due, then your dinner may cost you $300 or more, depending on how long you take to pay that credit card debt fully.