8 simple budgeting tips to help you save money
For some reason creating a budget is one of the most difficult things people can do. That’s usually because our wants supersede our needs – including mortgage, utility bills, insurance and basic groceries – and we end up spending more than we earn. However, creating a budget, especially during this period of economic uncertainty, is crucial to financial security.
So how should you go about budgeting?
There is no one size fits all approach, but there are simple rules to follow. The following tips show you how to best manage your money and set affordable financial goals.
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1. Define your needs
You have to pay your rent or mortgage. You may have to pay school fees or stump up for school uniforms if you have children. You need to buy food and household necessities. You have to pay your utilities bill and various insurances including car and home insurance. These are non-negotiables. These are the elements of your daily life that require money. When planning a budget, they are the first things to put in a spreadsheet.
2. Calculate your expenses
Once you know what your vital outgoings are, it’s time to get out the calculator and calculate these expenses. Check your bank statements and receipts over the last 12 months to make sure you have taken everything into account. Divide you expenses by 12 to get a monthly average figure.
3. Break your bills down into fortnightly or monthly instalments
Depending on wage payment frequency, you should allocate a portion of your wage to each separate bill. For instance, if you’re electricity bill comes in at about $500 per quarter, set aside $175 per monthly pay cheque to cover it. Do the same with your other utility costs, insurances and grocery bills. Some people even go so far as adding 10 per cent to 15 percent extra to ensure there are no nasty shocks.
4. Set up separate savings accounts
Once you have defined your needs and the amounts you will pay each month to service them, set up a separate savings account labelled ‘Bills Only’. It may take some discipline not to dip into this, however by creating an account with a specific purpose you’re more likely to leave it alone. You can in fact set up several bank accounts to fit your lifestyle. You could put money into a ‘Holiday’ account, a ‘Lifestyle’ account for dinners and movies when lockdown lifts, or a ‘High Interest Savings’ account that will earn you compound interest and give you more spending money in the future. InfoChoice helps you compare a range of Cash Management accounts that will best suit your needs.
5. Track your spending
By tracking your expenses, i.e., writing down everything you spend your money on, it will help you to manage your money better. Tracking expenses will also make you think twice before splurging. Tracking expenses for a reasonable period of time, should make it easier to meet your savings goals.
6. Be realistic about your budget
Budgeting is like dieting, sometimes you’ll want to break free of the shackles. When dieting there is no harm in splurging, just as long as it isn’t a regular occurrence. Have that Picnic or piece of cake, just don’t make it a habitual everyday occurrence. When budgeting, there is no harm in breaking the budget on the odd occasion to have a decent dinner somewhere (provided restaurants are open). If you want to break the budget for something regular like Kayo now that the footy season is about to re-set, then make sure you can afford it and add it as a regular monthly expense.
7. Budgets maintenance
Unfortunately, budgets aren’t a set and forget proposition. Your budget requires maintenance and it’s worth spending 15-20 minutes a week to ensuring that your finances are in order. Be keeping tabs on your budget and tweaking when necessary, you’ll avoid any financial headaches that may occur in future.
8. Try an online budget tool
Spreadsheets can be a pain in the rear, so if you don’t like them it’s time to look into online budgeting tools. There are plenty around that allow you to plan your budget and track your spending from the comfort of your smartphone. Some of the better ones include Goodbudget, Moneytree and the ATO app.
Budgets play an important role in money management and financial success. If you are already making more money than you are spending, congratulations and keep it up. If you are struggling to manage your finances, create a budget, manage it on a weekly basis and start putting money aside that leads you to your next holiday or other big purchase. By having a budget, you are less likely to break the bank.
This update is not financial advice. This article is general news and information.
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