Sometimes there seems to be too much month left at the end of your money.
When there’s money in your pocket, it’s easy to grab a quick coffee. But over several months, the cost of those little caffeine fixes can soon add up. Not having enough money can be stressful but having a budget will help you stay in control of your finances and work towards your goals. While you may have to give up your café-bought coffee, in the long run, you could enjoy a holiday or new car.
Setting up a budget is easy once you know how – here are a few steps that will get you closer to achieving your goals.
Work out where your money is being spent
Essential payments are due at different times, so make a list of your weekly, monthly, quarterly and annual costs.
Your monthly expenses might include phone/internet, mortgage or rent, and credit card repayments, while your quarterly costs might include rates, strata fees and gas, water and electricity bills. Some people choose to pay things such as insurances and car registration annually so these will also need to go on the list.
And don’t forget to include other essentials such as groceries, clothing and gifts, and petrol or public transport costs.
If you’re not sure whether you’ve got everything, there are some great online tools which can help.
Total all these expenses for the year, then add on a bit more (around 10%) for unplanned costs such getting your car serviced.
Calculate your income
To make a budget you’ll need to look at what is coming in for the year. Money earned from work will be the main source of income for many Australians, but you may also receive some government benefits, or income from investments and rental properties.
By taking away the total of what is going out from the total of what is coming in, you’ll see how much money you have left over for any extras and savings.
It can be easier if you work to a monthly budget, so divide your annual costs by 12. You will be surprised how much you can save if you’re organised, and you’ll thank yourself when you’re upgrading your wardrobe, or sipping cocktails on a beautiful, sandy beach!
Keeping to your budget
It can be easy to lose track of your spending – meeting friends for lunch and buying expensive birthday presents can push you over your monthly budget.
To help you keep track, some credit card providers now offer an app so you can immediately see how much you’ve spent, and there are other apps which allow you to monitor all of your spending. So when you see you’re coming up to the end of your monthly budget, you can decide to buy that new pair of shoes next month.
Ways to reduce your expenses
Once you know where your money is being spent, you’ll also be able to see where you can find some savings. For instance, there are some excellent packages available on prepaid phones now. By using a prepaid phone, you know exactly what you’ll be spending each month and you’re less likely to be hit with a super high bill. Some insurance providers offer you a combined discount if you take out several products, such as building insurance and contents insurance.
You could also consider purchasing a prepaid card to use for your groceries so you aren’t tempted to overspend at the supermarket, and consider signing up for rewards programs that provide you benefits without changing the way you shop.
In other areas, look at ways to reduce loans, such as making fortnightly repayments instead of monthly and investigate any salary packaging options your employer may offer.
Although it seems like hard work, once you’ve set up your budget, it gets easier. By sticking to your budget you can start to see a positive difference in your savings – which means less stress and more available cash to put towards the things you want to do.