Posted 23 months ago
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We’ve all heard about how ‘every little bit counts’ when it comes to money, and while the saying is overused, it’s very true when it comes to budgeting. Knowing little changes can make a big difference often isn’t enough to motivate us to go through the exercise of budgeting our little everyday details. With the growing accessibility of fast cash loans and buy-now-pay-later finance options, it’s all too tempting to become lax in our money management.
Starting a budget is much easier than it seems, especially with the variety of tools we have today. Before you set up your budget, take a look at these top 10 tips to help you get started.
1. Track incoming and outgoings
For your budget plan, you’ll need to know how much is coming in and where your money is going out. Track your incoming and outgoing for a week or more. You can do this with a free app like ASIC’s MoneySmart, or you can do it on paper or a spreadsheet on your computer.
Keep your receipts and use your bank statements for accurate figures. Break up your outgoings into categories such as fixed expenses (rent or mortgage), utilities, leisure and entertainment, and essential groceries. Use this budget planner to inspire your categories.
2. Outline your budget
The next step is to write out your budget plan. Use the same categories for tracking your outgoings to project how much you’ll spend. Use these spending projections to guide your outgoings and spending for the coming week, fortnight, or month.
Make sure you plan for savings. Decide how much you’ll save from each pay cheque and have it automatically paid into a high-interest savings account. If you’re not saving enough to meet your goals, check your budget to see where you can cut back.
3. Set up a savings plan
Regular saving is the most powerful thing you can do to achieve your lifestyle and financial goals. Commit to saving 10, 20, 30 percent, or more of your incomings. Think of it as paying yourself. Always have a purpose for your savings, whether it’s retirement planning and extra super contributions, a new car, or a big wedding.
4. Review and update projections
Letting your budget go out of date is a common pitfall. As your situation changes, remember to review and update the projections in your budget plan. You might get a raise at work, welcome a new baby, or move to a cheaper rental. Anything that changes your incomings and outgoings warrants adjustments in your budget plan. By keeping your budget plan up to date, you’re more likely to follow it and reach your goals.
5. Set realistic goals
Whether you’re saving for a housing deposit or that trip around the world, set realistic goals. If you’re trying to go from saving nothing to 50 percent of your pay overnight, you might find the sudden disruption to your lifestyle self-defeating. Realistic goals, on the other hand, are achievable. Each time you reach a milestone, you’ll be motivated to continue to the next.
6. Set new goals
As you achieve a new goal, remember to set new ones so you always have something to move towards. If you’ve successfully saved up for a $10,000 emergency fund, it could be a great time to work towards saving for a holiday or new car.
7. Use the 50/20/30 plan
Complexity is another common pitfall in budgeting. For some people, the idea of a budget with a long column of categories is too complicated to maintain. If this is true for you, try the 50/20/30 plan. This easy structure has you spending 50 per cent of your incomings on necessities, saving 20 percent, and using 30 percent for your lifestyle choices.
8. Try the three-category budget
Another strategy for keeping it simple is using the three-category budget. Rather than tracking every cent you spend, choose three categories you’re most likely to overspend in and track only these. If you spend too much on clothing and accessories, eating out, and alcohol, focus your effort on these areas and cut back there.
9. Empower yourself with the right tools
Sometimes people plan their budgets only to fail because they don’t have the right tools. There’s no perfect solution for everyone. Find the best tools – whether it’s an app linked to your bank accounts or an Excel spreadsheet – for you and your lifestyle.
10. Stay motivated
You’re the only person in charge of your finances, so make sure you stay on track and motivated to follow your budget. Celebrate your wins, regularly remind yourself of why you’re saving, and review your goals to bring to mind why it’s all worth it.
A budget plan is an essential tool that can help you achieve your lifestyle and wealth-building goals. It’s not always easy to keep to a budget plan, and life can throw you curveballs. Speckle offers you small loans for when unexpected events happen. Contact us today for more information.