One of the best ways to meet your savings goal is by following a budget.
Whether you’re embarking on a big holiday, saving to buy a house, or saving for saving’s sake, it’s worth sticking to a budget. Follow these simple steps to feel more in control of your finances and strike the perfect balance between spending and saving.
Assess your expenses
Take note of the money you have coming in – if you’re a freelancer, include an average figure of how much you’re likely to make in a given month.
Then estimate what your fixed expenses are. Begin with regular payments like rent or home loan repayments, transport, power, phone, internet, transport, private health insurance, car repayments and so forth. It’s unlikely you’ll be able to cut back in these areas, but knowing how much money you have left over after making these payments will help you draw up a realistic budget.
Finally, factor in all the variable costs that make up your daily life – petrol, transport, groceries, clothing and entertainment. Use your past spending – often accessible either through credit card statements, bank statements, receipts or shopping dockets – to estimate your average variable expenses. These are areas you may be able to cut back on.
Using an online budget planner can make the process a lot easier.
Set realistic targets
Building savings is a lot easier when you set a clear, specific target. If ‘saving more’ is at the top of your checklist, think about how much you can afford to save. Are you able to save $20 a week or even $50 a week? Setting measurable targets makes it far easier to achieve your goal.
Draft a budget
So you know how much money you have coming in and going out. You know how much you need to save to reach your savings goal. What’s next? Draft your budget. Choose a set time period for your budget that suits your particular circumstances. For instance, if you get paid fortnightly, you may want to set your budget for a fortnightly basis.
A realistic budget is the key to success. Challenge yourself to save as much as you can without making it so strict you miss out on fun and leisure activities.
Aim to live within your budget
Print your budget out and keep it somewhere safe and accessible. Always refer to it when purchasing big-ticket items or when doing things like your weekly grocery shop.
If you’re struggling to find the cash to achieve your goals, start challenging your expenses. Plenty of apps are available, like the free TrackMySPEND app, which show you where your money goes. It’s a great way to identify where you can cut spending and get back on track financially.
ME research conducted in 2016 revealed that by tracking their spending, participants were able to identify areas or behaviours where they could cut back and save – in some cases up to $600 a month.
Revisit your budget from time to time
Is drafting a budget worth the effort? The answer is a definite thumbs up. As well as helping you save, your budget will let you see how well your finances will stand up to things like going on a prolonged holiday or getting into home ownership.
The shape of your budget will change as your priorities, lifestyle and circumstances evolve, so be sure to revisit your budget every few months to assess if it’s still the right fit for you.
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The trustee of Tasplan Super (ABN 14 602 032 302) is Tasplan Pty Ltd (ABN 13 009 563 062). AFSL 235391.