Here, Elston Strategy Adviser, Dean Ireland answers five common budgeting questions that may help you achieve your goals sooner. As you can see from Dean’s answers, it really is all about your attitude to budgeting.

In your experience, where do most people go wrong with their personal budgeting?

There are two reasons people go wrong – they’re not realistic and they’re not flexible. Too often we come across individuals who set goals with unrealistic time frames, which ultimately leads to disappointment and a disconnection with their personal finances. We also come across budgets that are calculated to the dollar.

Flexibility is important, as there’s always something that will come up outside your planned expenses. The most important part of completing a budget and sticking to it in my opinion is creating the discipline first, not so much the numbers. We often suggest making the goals small and regular to create a discipline, and then increase the goals over time.

If you could give one budgeting tip, what would it be?

Budget on the worst case scenario. You can do this by not taking into account a bonus or applying the most expensive bill period to the full year. If you plan for a worst case scenario, your budget should be easier to achieve and therefore work. Another example I often suggest is to double your mortgage interest rate to ensure you can afford the repayments.

In your opinion, is it easier to stick to a personal budget when a financial planner has helped you formulate it?

A budget will only work if you are ready and willing to take responsibility for your own position. A financial planner will remove emotion and outline the true details of your spending habits, which can be confronting at times. Ultimately, a planner can guide you and help you create a discipline by holding you accountable, but the rest is up to you.

When do you think people should start budgeting and does it matter how much you earn?

Budgeting should start when you land your first job. It doesn’t matter how much you earn, money is money and learning how to use it early will only benefit you in the long run. Starting young will also allow you to understand tax and superannuation, as these two items will be an automatic deduction from your income. Managing cash flow is the cornerstone of wealth creation, so it’s never too early to start to budget.

When and how often should you update your personal budget?

You should review your budget every six months or when you reach a milestone. You could hit a savings target, get a pay increase or change your circumstances, any of which would lead to a review of your budget. Remember not to be hard on yourself as a budget should be kept flexible, but monitoring your progress is always important to ensure your remain in control of your cash flow.

Need some guidance?

Many people find it easier to stick to a budget created by a third party. Elston can help you create a realistic budget to help you reach your financial goals. If you’d like some professional help, please contact us on 1300 ELSTON and arrange to talk to one of our financial planning experts.