Financial Planning
Financial security - back to basics
At its simplest, financial security may be defined as having a regular income sufficient to pay for the goods and services we need to live in reasonable comfort.
As Mr Micawber said in Charles Dickens David Copperfield , Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Our modern credit-based society gives us greater flexibility than in Dickens time, but at the end of the day we still need to have enough income to match our outgoings. Creating financial security means more than simply muddling through from fortnight to fortnight. To keep us firmly on the right side of the happiness/misery scale, we need budgeting skills and we need to be able to draw on financial planning expertise.
The benefits of budgeting
A budget may be seen simply as a way of tracking your annual income and expenditure. It takes planning and it takes discipline.
Without a budget, you will have little idea about how much money you have and need to meet the necessary expenditure of your life. This makes it very difficult to know how much you can regularly put aside for your future needs.
Needs and Wants
A fundamental part of any budget is identifying those things which you really need to live a healthy life your needs, and those which you would like to have, to improve your enjoyment of life your wants.
Many of us have trouble differentiating the two, and spend accordingly. The result can be no money left over to save, or a gradual drift into debt through excessive use of credit. Budgeting is a mechanism for keeping our spending within our means, and if possible taking into account our future needs as well as our day to day needs.
The budgeting process
Write down your monthly income, then estimate your average outgoings:
 Basic expenditure (needs), including rent/mortgage
Lifestyle expenditure (wants), eg entertainment
Loan repayments
Savings objective
By including a reasonable (say 10% of income) savings amount in your budget, you are paying yourself first and putting some aside for your future.
Identifying your incomings and outgoings enables you to target areas where spending may be out of control and also set out a clear path for savings. If your outgoings are ahead, you need to examine your lifestyle expenditure to see what you can do without.
Don't view your budget as restrictive or as taking the fun out of life. A successful budget can make the pleasures in life easier to attain and give you a newfound sense of control and confidence in your ability to manage your lifestyle.
Planning for financial security
Once you are able to put aside a regular amount each pay, you can consider a regular savings/investment plan. You can save for shorter term goals such as a holiday, or use surplus income for longer term goals such as making additional contributions into a superannuation fund to improve your retirement lifestyle.
Within sight of retirement, you should also be reviewing your superannuation and retirement income strategy to ensure financial security continues throughout your retirement.
Where can I go for advice?
For more information on budgeting download the Budgeting Made Easy booklet from Police Credit Union's website. Login to www.pcu.com.au and locate the links page in the fast find section of the home page.
For expert advice on setting up a savings investment plan and making longer term financial decisions such as managing your superannuation and planning your retirement income, contact your local branch to arrange an appointment with a Bridges personal investment planner. (see back page for branch locations)
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