The foundation of every successful financial plan is the savings and quick access to cash when you need the most. It does not matter whether you are working part-time and living paycheck to paycheck or earning a six-figure income, you have to make sure a part of your income is going towards your savings. With the remainder, you have to know where your money is going. You need a budget, and more importantly, you need the discipline to stick to it.
The key to an effective budget is that you have, to be honest with your ambitions and wants. You know what you can afford and what you cannot. Keeping this in mind, start budgeting.
Never spend your money before you have earned it.
As they say, the first step is the hardest of all. Creating a budget isn’t an exciting thing to do. I am a finance professional and honestly speaking, I find it annoying to pre-determine where I am going to spend funds for the coming week, month or the entire year. But it is necessary.
At the start of each month, write down your main spending areas and allocate a dollar figure for each category. Remember to keep some money aside for your savings before you distribute money to other areas. Higher the saving percentage, the better but go as per your personal situation. For example, if you earn $1,000 a fortnight, keep $200 aside for a rainy day and start allocating the remaining $800 to your spend areas. If you like detail, you can create several sub-categories for savings too. For example, medical fund, travel fund, savings for the house, etc.
Next step – choosing a system to record your budget and track spendings. There are several online tools and apps available for budgeting, but I find Excel spreadsheets most useful. If you are new to spreadsheets, don’t worry – you don’t have to create one yourself. Australian Securities and Investment Commission (ASIC) have put together fantastic budgeting tools. They are straightforward and customised to Australian users, you can either use them on the web or smartphone apps. Click here to check ASIC’s budgeting page.
Once you have prepared your budget, have discipline and make sure you do not overspend. It’s easy to be tempted with everything that is available around us, but you have to control your spending temptations. It might be difficult in the beginning, but when you get used to it, you will love the feeling of extra cash available in your account.
+ Monitor your utility bills and ensure you pay your bills on time to avoid and late payment fees. Some providers also provide a discount for paying bills on time or setting up direct debits.
+ Most credit cards offer 55 days interest-free. You can avoid any interest payment by clearing your credit card debt before the accrual period starts.
At the end of each month, review your performance and see how your expenses tracked. Learn from your experience and plan for the next month.
If you would like a personalised budgeting template, drop us a message below with your name and email address.
