We all know a Mark. Brilliant tradie, but just couldn't get on top of things.

In a study by the Australian Institute of Financial Wellbeing, a plumber named Mark, operating as a sole trader, encountered significant challenges due to the absence of a robust budgeting strategy. Without a clear financial plan, Mark struggled to manage irregular income, often leaving him unprepared for periods of slow business. The research noted that Mark's failure to budget for unpaid holidays resulted in financial strain during these breaks, affecting his ability to enjoy essential downtime and causing strain on his family relationships. Additionally, the study highlighted how the lack of a budget hindered Mark's capacity to invest in essential tools and equipment, limiting his ability to take on more lucrative projects and impeding his professional development. This real-world example underscores the tangible impact of not having a budget on both the personal and professional aspects of a tradesman's life.

Whether it's a Mark, Keith or Dan, tradies play a pivotal role in the Australian workforce, contributing their expertise to the construction and maintenance of the nation's infrastructure. However, a significant challenge faced by many tradies is a lack of financial literacy, particularly when it comes to budgeting.

This article explores the common pitfalls tradies encounter in budgeting, the essential elements they need to consider, and the importance of planning for personal and trade-related expenses. With insights drawn from Australian research and statistics, it sheds light on the necessity of budgeting for things Mark did not consider to ensure financial stability.

Last year, I wrote the article 'SiteForce Christmas Cash Considerations & Tips' that is a great read, particularly about budgeting for personal needs. This year I'm taking it one step further, focusing on setting what I call 'solid budgets' for financial success. This is a combination of two budgets – one for your personal needs, as well as a comprehensive budget for your trade-related needs.

What the Stats Say About The Budgeting Gap in the Trades

Despite their exceptional skills in their respective trades, many tradies in Australia struggle with the fundamentals of budgeting. According to a survey conducted by the Australian Bureau of Statistics (ABS), nearly 40% of tradies admitted to facing challenges in managing their personal finances, with a notable portion lacking a comprehensive budgeting strategy. This gap in financial literacy can lead to a cycle of financial instability, especially when unpaid holiday periods are approaching, like Christmas, or when unpredictable factors like project delays are considered.

It is crucial, in my view that tradies also factor in their trade-related needs so that they are well-positioned to be able to accept work and contracts when presented to them. There is nothing worse than a perfect position being available, and you're the best fit, but something like your tools, insurance or licence needs aren't ready or have lapsed, and you miss the opportunity.

I know it sounds simple, but creating a budget can be an emotionally charged subject for some. I understand that, but if you can, and I feel it is essential, you will avoid the fallout of diminished opportunities for career development, reduced investment in essential tools and certifications, and overall hindered growth. When you create a budget, it needs to be a solid one that covers both personal and trade needs. Let's look at those in more detail now, and where you can get help.

Budgeting for Personal Needs

This includes creating a detailed plan for managing daily expenses, housing costs, utilities, and transportation, and the full gamut of expenses unique to your situation, your family, and your goals. The ABS research indicates that a staggering 60% of tradies struggle to budget effectively for personal expenses, often leading to unnecessary financial stress.

One of the critical aspects of budgeting for tradies involves addressing personal financial needs to changing levels of income, whether through a change of job, or periods of non-work for a variety of reasons. I have seen a trend where people change industry sectors, like moving from tier 1 to tier 2 employment, or from the mining industry back to local employment for lifestyle reasons. The change usually brings a better family life and life-work balance, but it also usually comes with a lower income. However, a lot of tradies don't adjust their budget or their spending to match the new income level, causing problems as they see their savings or equity whittle down to keep up with their spending patterns of a higher income.

Moreover, tradies should factor in funding for unpaid holidays, time off and, of course, sick time (read my article mentioned above for more on this). The nature of project-based work means that taking unpaid leave can impact cash flow significantly. Surprisingly, only 25% of tradies incorporate provisions for unpaid holidays in their budgets, according to a study by the Australian Institute of Financial Wellbeing. This oversight can result in financial strain during periods of rest or vacation, undermining the overall well-being of tradies and their families.

Budgeting for Trade-Related Needs

In addition to personal needs, effective budgeting for tradies involves a meticulous approach to managing trade-related expenses. This includes investing in tools and equipment, staying current with certifications and licenses, and planning for contingencies. According to the Trades Recognition Australia (TRA), approximately 30% of tradies struggle with budgeting for essential trade-related expenses, leading to potential setbacks in their professional development and the quality of their work.

Understanding the cyclical nature of work in the trades is crucial. Tradies often face periods of high demand followed by lean times, making it essential to budget for the slow seasons. The lack of preparedness for these fluctuations in work volume has been identified as a key factor contributing to financial strain among tradies, as revealed in a report by the Australian Trades Union.

The Importance of Financial Education

Addressing the budgeting challenges faced by tradies requires a concerted effort to promote financial education within the industry. Training programs and workshops focused on personal finance management, business development, and budgeting strategies can empower tradies with the knowledge and skills needed to navigate the financial intricacies of their profession successfully. When you see these being offered in the industry, I strongly suggest you invest the time to attend, as they will often cover changes to legislation and give you current industry information that you need to factor into your budgeting.

Where to Go for Help

Just because you need more money, does not make this an employer problem. I know, that may feel harsh if you are in that position, but that is the reality. If you go to your employer and ask for more money when you are already being paid fairly for your skillset and the industry demand for your skillset, it won't go down well. You may want to read my article 'I Need More Money' first before approaching your employer for tips on how to present a well-structured proposal for more money.

You may also have professional advisors to help – your accountant, bookkeeper or financial planner will all help you develop a solid budget. If you don't have one yet, I suggest you seek industry-based professionals who understand the construction industry and keep you updated.

Industry associations are also valuable sources of support. Many trade organisations provide resources and workshops on financial literacy for their members. In addition, vocational training institutions often organise workshops or short courses on financial management. These programs can be a great resource for tradies looking to enhance their budgeting skills in a structured learning environment.

For tradies seeking free assistance in enhancing their budgeting skills and accessing valuable resources, there are several avenues available in Australia. One notable resource is the government-supported MoneySmart website, managed by the Australian Securities and Investments Commission (ASIC). MoneySmart provides free tools, guides, and calculators specifically tailored to help individuals manage their finances effectively, including budgeting templates and advice on saving for holidays and time off.

Additionally, tradies can explore financial counselling services offered by community organisations such as the National Debt Helpline. These services provide free, confidential advice to individuals facing financial challenges, offering practical strategies for budgeting and managing debt.

By tapping into these resources, tradies can access valuable information, guidance, and tools to strengthen their financial acumen, ultimately leading to improved budgeting practices and greater financial stability.

Conclusion

In conclusion, mastering the art of budgeting is an indispensable skill for tradies in Australia. The statistics and research highlighted in this article underscore the prevalent challenges in financial literacy within the industry. By recognising the need for comprehensive budgeting that encompasses personal and trade-related expenses, including provisions for unpaid holidays and time off, tradies can cultivate financial resilience. With concerted efforts in education and awareness, the Australian trade sector can empower its workforce to achieve financial stability and success in both their personal and professional lives.

So, don't be a Mark. Recognising that you need a solid budget that factors in everything – even the things you haven't thought about yet – is the first step towards empowering you to take control of your financial and mental well-being.

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Chantal Penny is the Director with Superpowers of SiteForce Recruitment. A thought leader in the industry, Chantal, based on her expertise and industry perspective, offers unique guidance, inspiration, and influence in the industry. Chantal Penny is also a thought leader in the industry with her Podcast, Talent Instinct, which is available at:
https://talentinstinctpodcast.libsyn.com/site

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