By dedicating time to looking at money coming in and going out, you can direct your cash to where it matters most.
A budget lets you find ways to spend less and save more to achieve those money goals. Here’s how to start.
“I will never be in that situation where I can’t take care of myself,” Cindy Crawford has said of her need for financial security.
(Credit: Instagram)1. Set it up
Not sure where to record your income and expenses?
Government website Money Smart has a handy budget template so you can work out where your money is going, create custom items and, if needed, even change the currency.
Simply visit the website and type in ‘budgeting’ and you can download the Excel spreadsheet.
2. Record your income
Begin by taking stock of your income.
List all the money you bring in from your wage or salary, any side gigs you may have, as well as any investment returns.
Once you have a good idea of how much you are bringing in per week or month, it will be easier to get a read of how much you can spend.
3. What is your spending plan?
According to licensed Australian financial adviser Helen Baker, planning helps you identify possibilities, but action is what pockets those savings.
Helen advises exploring three different spending plans: “living my best life”, “a nice life” and the “absolute minimum”.
“Have a plan for if you lose your job and put that money away. If the worst doesn’t happen, you will have saved more to invest,” says Helen.
“Redefine your goals as your circumstances change.” Head to Helen’s website for more information.
4. Consider the 50/30/20 method
Here’s a budgeting style that is popular due to its simplicity and flexibility.
With this method, 50 per cent of your after-tax pay goes towards the essential costs of living, 30 per cent goes towards wants and 20 per cent goes towards savings and debt payments.
It’s a good way to keep track, and if you overspend in one category – say buying takeaway (a want) – you know to cut back on other wants such as spending on clothes or beauty products.
5. Set some goals
Set yourself some short-term and long-term financial goals, write them down and keep them in mind.
Let’s say you are saving for a home deposit that you don’t want to touch for a while.
You can funnel the money you save into a high-interest savings account.
Make sure you add in some fun goals – a weekend away is something tangible in the short-term to work towards.
