The Budget’s tough reforms will highlight some handy financial lessons for everyday Australians.

Debt is the driving force behind an expected painful Budget tomorrow night.

Treasurer Joe Hockey’s first Budget is tipped to slash spending to attack the nation’s growing debt pile.

Financial experts warn there will be some bitter medicine, but it will also highlight some handy financial lessons for everyday Australians.

Lesson No. 1, is don’t spend more money than you bring in.

Government spending and debt have ballooned since the global financial crisis, and forecasts show that, if left to grow unchecked, it will become a national financial disaster.

“You can’t keep spending more than you earn forever, so they need to pull their head in to change this,” says Catapult Wealth director Tony Catt.

He says people should take a similar approach with their household budgets.

“Always keep an eye on your debt levels and don’t overcommit, particularly given interest rates are going to rise in 12 months’ time.”

Another key lesson is that not all debt is bad. Hockey won’t try to eliminate Australia’s debt completely, only stop it spiralling out of control. Debt used to grow a nation’s infrastructure is valuable, and so is debt used to grow personal wealth.

Wealth For Life Financial Planning principal Rex Whitford says household debt is good if the asset that it buys goes up in value, adds value to your life, and the interest bill does not cause you financial pain.

Household debt reduction should target areas that will hurt the least. Hockey’s controversial new tax on high-income earners would hit those who can most afford it.

“Most people will have to pay something, but those most able to pay will pay the greatest amount,” says Whitford.

On the home front, this lesson may mean cutting out a few coffees a week rather than cancelling health insurance.

Avoiding knee-jerk reactions to changes in your financial circumstance is vital.

Deakin University financial lecturer and tax expert Adrian Raftery says the Government has “been making enough of a noise for us to know that there will be some unpopular decisions”, while a MyBudget spokeswoman says people should not make hasty financial decisions based on Budget announcements.

Wait for details to become clear, she says. And remember that many of the changes may not make it through pass a hostile Senate.

A final lesson: Seniors group Your Life Choices spokeswoman Kaye Fallick says the best way to cope with tough Budget measures is to “stop living in denial’’.

“Too many people, especially older people, don’t even know what their expenses are. The first thing they can do is get out of denial and have a look at their financial statements.”

“There are free financial counsellors across the country.”

BEAT THE BUDGET

HEALTH:

Expected Budget reforms to make people pay some money towards visiting a GP.

Action: Check your private health cover inclusions to make sure you’re not wasting money.

FAMILY:

Middle-class welfare family payments are expected to be slashed through changes top means testing.

Action: Review your household spending and look for money leaks.

SPENDING:

Speculation of big cuts to government bodies such as the ABS and CSIRO and a range of government programs.

Action: Before buying big-ticket items, ask if it is the best place for your money.

FUEL:

A plan to bring back petrol price indexation to inflation could raise more than $1 billion a year.

Action: Shop around cheap fuel and use discount vouchers.

This article was first published on news.com.au and can be found here.