Alternative budgets explained

In Client Voices, there are two types of budgets.

1 - Main budgets

These budgets are for tracking the client’s actual situation. Traditionally you’ll start with a draft budget formed from estimated information. Then you’ll use actual evidence to make the budget more accurate, and hopefully over time, you’ll work with the client to refine the budget.  

The hope is that the budget improves over time.  

2 - Alternative budgets

These are budgets you’ll use to run hypothetical scenarios. They are budgets that can tell you how the client’s financial situation will perform in different scenarios.

Here are some reasons you might want to use the Alternative Budget.

Balance the budget

Probably the most obvious use for and Alternative Budget is to balance the budget. You can show your client what their budget is capable of and how they can improve their lives by improving their budget. Especially if the have a saving goal.

Changes in circumstances

If your client is facing redundancy, retirement, maternity leave or any other big change in circumstance, you will want to see how their budget will be impacted. This can help your client make decisions about what they can cut back on, or explore other options that could reduce their total spend.

Hardship budget

Sometimes you need a budget to prove to creditors how much your client can actually afford to pay back.

Creditors sometimes want to see that even with a well-crafted budget, there I simply not enough left once essential expenses are covered.

You may also need to show KiwiSaver providers that you have made reasonable attempts to improve the budget before being eligible for KiwiSaver hardship withdrawals.

No Asset Procedures(NAP) and Summary Installment Orders (SIO)

Your client may be deciding whether an SIO or NAP is right for them, comparing their current budget could change.

Getting a loan

An Alternative Budget can help your client decide whether it’s a good idea to get a loan. Perhaps they need a car, or a new computer. They have some disposable income, but not enough to buy it outright. An Alternative Budget might help them decide to save for it if they can instead.

Relationship breakdown

Relationships are complicated things and they have a huge impact on a person’s financial situation. Clients contemplating separation may want to see how they do without their partner, or a client who has been abandoned may need to see what changes they need to make to their budget to make it work.