What’s your real run rate?

Exhibit A: the $810.33 power bill. Ouch. Didn’t see that one coming and, needless to say, it hurt.

Ever been blindsided by a bill?

There’s always that more-or-less-scary moment when you move into a new place not knowing exactly how much it’s going to cost to run it. It’s impossible to know at first – with the different whiteware, different  lights, different heating or even different power meters. That’s exactly where we found ourselves five months ago.

As with any change you make to your lifestyle – adding a new car, a new pet, a new place – you need to figure out how much extra it will take month in and month out to pay for it.

Today is Budget Day for the government, so once again it’s an opportunity to look at our own budgets. And a big part of that is looking at our operating costs and making sure we run a surplus of our own. Sorted’s money planner is your tool of choice.

Look up your overheads

Many times these sorts of ongoing expenses are called ‘overheads’, and as far as I can tell they’re called that simply because they are the costs to keep a roof ‘overhead’. (Or perhaps because it’s easy to get in over our heads.) In any event, these are the costs to run your business or household, so power counts too.

Which brings us back to that $810.33 bill. Surely that couldn’t be right, could it? After a frustrated, tearful phone call with my better half, I got on the phone straight away to the power company.

Now there’s always an imbalance of power between the customer and company in these sorts of conversations – they have all the information, and you are on the hook to pay up. However, I did have some leverage – I still had the money, and of course they wanted it. After all, they aim to keep us paying and their revenue stream flowing.

So my now-favourite office manager was quite helpful in clearing things up on why the bill was so high. After we established that the bill was in fact for the property we are on – I even re-read the power meter and sent her snapshots of it – she was able to extend the early payment discount and knock a quick $130 off.

Find your run rate

But the really interesting thing I was able to do with the office manager over the phone, which I had never considered before, was to take the power usage from the previous few days and estimate what it would be for each month going forward, based on the kilowatts used per day. I bet anyone can request this from their power company.

That was our run rate right there; exactly what I was looking for. Thankfully it worked out to be in the $300 per month range – which is still high, but certainly less devastating than $800. And more importantly, we now know what to expect and can plan for it.

Return to surplus

This year’s Budget features a return to surplus, which the Prime Minister described as being ‘wafer thin’. Governments, of course, often spend more than they earn and run a deficit (see our Australian counterparts across the Tasman), but if your household budget has one, it can soon land you into trouble. (In fact, if you regularly borrow on a credit card each month for everyday necessities like food or power, get help immediately from a budget adviser at 0508 BUDGET.)

So making a surplus – and then deciding what goals to put it towards – is what successful budgeting is all about. It means you are able to save from every pay.

To increase your surplus, go through all your expenses, whether overhead or just occasional, and challenge each one. Focus on either reducing them or eliminating them entirely.

Yet as your surplus income increases, chances are your expenses will creep up as well – which is called lifestyle inflation. So you need to stick to basics, like still making your lunch instead of getting into the habit of buying.

We all need to cap our spending somewhere, just like the government.