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The sooner you start planning the better
Do you know how much you can save? To discover how much you can save you need to track how much you spend. Simple in theory, however many people have a psychological barrier to undertaking this exercise – perhaps it is the fear of the unknown.
On the contrary, knowing how much you spend and more importantly, how much you can save is very empowering. Firstly, you can determine when and how you will reach your goals (whether it be to take a holiday or buy a house) and secondly, you avoid the dilemmas of ‘should I or shouldn’t I buy this?’. You will already know your spending limits.
How do I get started?
A good starting point is to prepare a budget, and the key to starting and maintaining a budget is to keep it simple. If it is complicated and time consuming, you will find it hard to stick with it.
There are a number of tools available that can help you start and manage your budget. Some of these tools are extremely sophisticated and powerful. The key is to find something that works well for you and your family. You may find that an exercise book, drawn up with an income and expenses ledger works best. Whereas setting up an Excel spreadsheet may be more appealing for the computer savvy. Argentis has a detailed budgeting Excel spreadsheet and the Internet also contains some useful budgeting tools.
Budgets are not created overnight. Whilst you get paid on a regular basis and many of your expenses will be regular, there are always unforeseen things like doctor bills, birthdays, accidents and so on. There will also be seasonal adjustments required to take into account such as higher utility bills during winter and additional costs over the festive season. To be successful, you need to keep with it during these times, as you will finetune your budget over the months and years.
How do I stick with it and make my budget work?
Budgets are like diets. They deprive you of the things you like – in this case spending without care. Like diets too, it will be difficult to stick to your budget if there are no rewards or goals to aim for. You need to reward yourself for giving up some of life’s luxuries. This will only make you resent your budget. Keep it simple and realistic.
Start with a small realistic goal and always leave yourself with a buffer ‘just in case’. Once you have achieved this goal, it will be easier to set and achieve bigger goals.
Where can I save a little bit more?
Once you start getting the ‘budgeting bug’ you will be looking for more and more places to ‘save a few pennies’. Again, keeping it simple will be the key.
- Watch out for multiple small purchases: a $10 lunch each day can add up to $2,500 a year.
- Car pool to work or even better, ride your bike. A good way to save and get fit at the same time.
- Only shop once a week – this will reduce the number of times you can make spontaneous purchases. Remember to never shop when you are hungry.
- Keep your eye out for discounts. Purchase an ‘Entertainment Book’ and whilst supporting your favourite charity, you will receive discounts for restaurants, bakeries, magazine subscriptions, holidays, etc.
- Shop around (whether it be for your insurance, mobile phone, electricity, mortgage or bank). Be careful though – make sure that you do not pay end of contract penalties or reconnection costs.
Want more information about budgeting?
Budgeting successfully shows how it can all add up. Take your savings one step further and talk to your adviser about having your savings work for you. You’ll be amazed how much you can save.
This year, I will manage my money better
Sound familiar? Money matters are always a prominent resolution in a new year.
If your good money intentions have started to slip, you may like to reinvigorate your goals and refine your strategies by considering the following ideas:
- Organising your paperwork – file your payment slips, bills, tax deductible receipts and credit card statements.
- Write down a budget – draw up a list of your income versus expenses.
- Make changes gradually – you won’t pay off your debts by being budget-conscious for only one week. Consider saving a part of any windfall, such as your tax return or pay rises.
- Investigate salary sacrifice options and the government’s co-contribution scheme - this can help grow your superannuation.
- Crystallise your savings goal – having a specific goal increases your chance of savings success.
- Examine your mortgage – speak to your financial adviser about paying more than the minimum repayments to help reduce your loan faster.
- Review your personal insurances – ask about new products and discounts.
The sooner you start the better. To determine which strategy will best suit your personal circumstances, speak with an Argentis financial adviser today.
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