Federal budget underscores why you need your own household budget
I think I’ve figured out why journalists – myself included – are always so perennially disappointed by federal budgets.
Forced to surrender our phones and internet access for six hours in a budget ‘lockup’, there is, of course, an attendant ‘well, this better be good’ feeling.
There is also an innate defensiveness born of the HSC-like pressure-cooker environment in which you’re expected to deliver a stunning summary of the literally thousands of pages of information Treasury dumps on you in one go.
Take a leaf out of Treasury’s books and prepare your own household budget,Credit:Istock
At the end of the day, budgets are just statements of anticipated revenue and expenditure over a given time period, plus a calculation of the resulting surplus or deficit of funds.
And spoiler alert: Treasury knows how to add up.
I think we in the Australian political diaspora keep getting so disappointed because we keep hoping the Treasurer’s budget speech will turn out to be something closer to the American president’s constitutionally mandated “State of the Union” address.
Dreaming of a grand vision, what we get in reality is little more than a household budget on steroids. Only instead of income derived from work, there’s money from taxes levied on company profits, individual pay packets, purchases of goods and services and sundry other things like the fuel excise. And instead of grocery bills and mortgages, there’s welfare and pensions to pay for, along with schools, healthcare and submarines.
Policies like one-off tax cuts or ‘cost of living’ payments are just a drop in the bucket compared to the half-a-trillion or so dollars that wash in and out of Canberra every year.
As boring as they may ultimately turn out to be, budgets are, of course, a key part of our democracy.
And, amid the rising cost of living, I would also argue an increasingly key part of household financial management, too.
Amid predictions that interest rates could rise nearly two percentage points over the coming year and a half, households would do well to take inspiration from the federal budget and sit down to have a good look at their own incomings and outgoings.
The federal budget forecasts consumer prices will grow 4.25 per cent this financial year, but average wages to only rise 2.75 per cent, meaning a growing squeeze on finances.
As I wrote earlier this week, it would be a good idea for many households to save any budget tax cuts and ask their boss for a pay rise in line with the 3.25 per cent rise Treasury is tipping for next financial year.
And if you’re keen to take a leaf out of Treasury’s books and prepare your own household budget here are a few tips to get you started.
There is no need for most households to freak out about rising interest rates and other living costs just yet. Most borrowers will have been stress-tested at application to ensure they have some buffer to afford higher repayments.
But as cost pressures do escalate, the best way to stay ahead will be to monitor your household budget closely for ways to adjust spending down or boost income to meet rising costs.
It might not be sexy or headline-making, but knowledge of your overall household cash-flow situation is powerful and well worth a bit of time to figure out.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Jessica Irvine is author of the new book Money with Jess: Your Ultimate Guide to Household Budgeting. You can follow more of Jess’ money adventures on Instagram @moneywithjess and sign up to receive her weekly email newsletter.
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