Martin Hawes: Modern solution to an old problem

Credit cards are used as fall-backs by many. Photo / Amos Chapple

I have a theory: in the past 20 years or so, credit cards have reduced our apparent need to budget and our ability to do so.

When our grandparents ran out of money, things were dire: the power was cut off, they didn't eat or were thrown out of their houses - they simply had to budget.

Today, if we run out of money we load the deficit on to credit cards so the consequences of not being able to match income with expenditure are not particularly grim - for a while, anyway.

Of course there is always a price because credit seldom comes free.

Sure, the credit card may be a useful device to smooth expenditure but for many with permanent deficits they merely darken the evil day.

Credit cards frequently compound the problem, as they have high charges and ruinous interest.

Viewed in this light, a plan for income and expenditure is even more important than it was a generation ago.

No one can run a deficit forever. We all depend on a surplus if our lifestyles are to be sustainable, and the way to get that surplus is to plan for it - that is, to budget.

Now, I am not proposing that we all go back to doing what granny did - my grandmother kept her money in a series of jam jars, each for a different purpose (milk money, power, groceries, rent).

Nor am I suggesting we should all cut up our credit cards (although there are certainly some people who would benefit from doing just that).

Instead, we should attack a modern problem with a modern solution.

While the only technology granny had available to make sure the power stayed on was a few jam jars, we have computers and websites to help us keep in the black. And we should use them.

Many web-based services help people manage their day-to-day money. Some are free, others cost; some are from banks and others are stand-alone services, perhaps with a coach to keep you on track. And there is also the Retirement Commission's site at sorted.org.nz.

All of the sites aim to make planning and tracking your income and expenditure easy.

In reality, living within our means is now a bigger problem than it ever was. To get ahead you must have a surplus and you should know that a deficit today is eventually as dire as it was for your grandparents.

If budgeting is a problem for you - whether major or minor - there is a solution.

* Martin Hawes is a financial adviser. His disclosure statement can be found at www.martinhawes.com