Budgeting advice from across the ditch

The leaks revealing intricate details of Treasurer Scott Morrison's Federal Budget have been few and far between this year, leaving many Australians unsure of what extra financial pressure or relief they should expect to see.

While there's been much chatter in recent years over governments being able to deliver the budget back to surplus, this could be years away as Australia remains swimming in debt.

But when it comes to the parliamentarians managing our ingoings and outgoings and ensuring we have a balanced budget, the same applies for our own personal budgets.

All budgets need to be gone through with a fine tooth comb and cost cutting made wherever possible.

For the average Australian which is a 38-year-old female according to the 2016 Census, mother-of-two Natasha Shourbaji fits the typical Aussie mould; at 38 she runs a busy household with her two young sons, Lewis, 5, and Sebastian, 7.

To keep her finances in a good place she stays organised and experts say it's critical everyone takes time to regularly review their spending and saving habits.

Here's how our federal budget and your own household finances can be successfully managed in 2017 and beyond.

INCOME VERSUS SPENDING

According to the latest budget review, in 2016-17 the revenue generated is expected to reach $416.9 billion ($446.9b), an increase of 5.2 per cent on the previous year.

However total expenses for 2016-17 are expected to exceed earnings, climbing to A$450.6b which means we are spending more than we earn.

This is never good.

In 2016-17 it was expected the government would rake in about A$201.3b from individual income tax, the biggest money earner followed by company and resource taxes (A$71b.)

Of the earnings a large chunk was forecast to be spent on social security and welfare (A$158.6b) and health (A$71.4b).

This year's budget is a long way off reaching a surplus, which instead has been set for 2020-21 but many Australians have heard this for years now so may remain sceptical around whether it can actually happen.

The government is already looking at ways to rake in extra money, this includes getting university students to pay back their debts quicker.

So while balancing the books by the Government still has a long way to go, budgets in the home also need to be addressed.

Ms Shourbaji said she watches her budget closely and tries to stick to buying Australian brands to support local businesses.

"I try to plan meals for the week and only buy what I need to try and avoid overspending," she said.

"I would also love to be able to buy all organic but it's just not financially viable for me to do so."

She sticks to a strict shopping list and hunts around for competitive deals for other household costs including her utility bills to ensure she's getting a good price across her various expenses.

DEBT

Not all debt is bad.

But importantly, whether it's the politicians or whoever is running your household finances, killing bad debt is key.

Good debt is deemed as debt for major assets including roads, energy and broadband projects which can help boost the economy.

Bad debt is when the government is paying for basic annual costs of services the Government provides.

Figures by NATSEM show in 2015-16 the estimated net public debt was tipped to be around A$278b or around 17 per cent of total GDP.

Their findings showed the amount each Australian carries in public debt is more than A$11,000 or the equivalent to about 12 weeks of full work.

Tribeca Financial's chief executive officer Ryan Watson said people should steer clear of bad debts such as credit card wherever possible and if they do have a card it should not have a limit any higher than A$3000.

"All credit debt should be paid off on a monthly basis - no exceptions," he said.
"High interest debt such as credit cards drown the financial aspirations of tens of thousands of Australians each year.

"The best way for a household to manage and pay down debts is by using structure, structures create discipline and greatly enhance a household's chance of achieving its goals."

Mrs Shourbaji said her home loan is her biggest expense and she used a mortgage broker to ensure she was getting a good deal.

When it comes to bad debt she decided to get rid of her credit card.

"I had a credit card years ago and used it badly so I ended up cutting it up," she said.

When it comes to home loan debt - good debt - Mr Watson said borrowers should not have mortgage debt that is more than 80 per cent of the value of their home or "anymore is usually a recipe for disaster."

INVESTMENT

Ahead of the Budget there's been already some attention gained on ways to encourage first home buyers to try and crack into the market, which is turn is a long-term investment.

This includes giving them generous tax breaks by allowing them to direct pre-tax income into a savings account to help them get their foot on the property ladder.

Under that scheme, hopeful property buyers could contribute just A$5000 of their pre-tax earnings into a savings account, effectively reducing their taxable income by A$5000 in that year.

An additional A$5000 a year post-tax income could be added to the account, taxed at a concessional rate.

Mortgage Choice spokesman John Flavell said "anything that can be done to help first home buyers achieve their property dreams should be welcomed."

But he warned entry-level buyers should adopt other strategies to ensure they have a long-term goal to invest their money into property.

"First home buyers need to be prepared to implement a few other savings strategies, like saving a specific amount of their wage; cutting back on unnecessary extras (like overseas holidays or new cars); and choosing to live in affordable accommodation," he said.

"In addition, first home buyers need to be savvy with where they put their money."

Each year the Federal Government releases its planned spending in key areas including agriculture, defence, science, export trade agreements, youth and combating tax avoidance which in turn is hoped to deliver investments for the nation.

But for Aussies focusing on their super or their own long-term investment - which has gone largely untouched so far in the budget lead-up - education is one of they keys to achieving financial success.

Already announced is that students will have to start paying back their education debts sooner following with the income threshold that is must start to be paid back from falling from A$55,000 to A$42,000 meaning the sooner graduates start earning the sooner they will have to pay back their debts.

Mrs Shourbaji said from the Federal Budget she would like to see more funding for schools to "allow for more teacher aides to be available in the early year level, especially prep to year 2."

"It's an extremely demanding job for a teacher to give every student the attention they need and without extra help some children will inevitably be missing out."

Overall a good guide for people is to try and save at least 10 per cent of their income or invest it elsewhere.