Wednesday, 14 August 2013

Resetting budget expectations in 2013

Last week I sat down and did some calculations and realised why I could never keep up with my budget and my savings plan.  I realised that I actually had much more in quasi non discretionary expenses than I had expected including health insurance, gym membership, rent, car insurance, fuel etc.  Have a look at the post if you want more details and to see how you should think about these expenses.

What this meant though is that I had to reassess my savings and expenditure goals in light of this.  I have attached my 2013 financial goals but basically I was hoping to achieve the following each month

  • $3,500 per month towards my home loan offset account
  • $2,000 per month towards shares
  • $2,200 per month on personal expenditure
Since then things have changed quite significantly...

Not only have I realised that I cannot keep up with this personal expenditure, with the significant falls in interest rates, my investment property is now positively geared and I don't really want to be contributing as much to it each month.  The share market has run pretty hard but I still think there is value to be had here in small pockets and when the market falls.

I am re-adjusting my budget and savings goals to take account for the change in conditions.  When I did this same process last year I mentioned that you should not be dogmatic about your savings goals.  You should try and achieve them but if you have fundamentally not assessed them correctly or if the market changes then you should change your expectations. a result I am changing my goals for the rest of the year

I am therefore updating my savings and expenditure goals.  I thought about leaving fat in my personal expenditure target but I thought that I would rather have a challenge.  Because I have not been achieving my expenditure goals I have become a lot more careful with where I spend money and I think this is a good thing.  The following therefore are more achievable but would still be a challenge.

My new targets for 2013 are as follows:
  • Home Loan Offset Account: $2,400 per month (-$1,100)
  • Shares: $2,500 per month (+$500)
  • Personal Expenditure: $2,800 per month (+600)
Interestingly, I went back and had a look and I would only have achieved my personal expenditure goal in one month (April 2013) which means that I still have a lot of work to do.  My new goals are only going to apply until the end of the year so I'll see how I go.

Do you change your goals?  Have you thought about changing your goals?  Do you find it hard to keep to your budget?  I would love to hear and learn from any experiences you may have!

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