How to build a budget you can stick to
As we head back out into the sunshine after months of social distancing, you might be feeling desperate to upgrade your work wardrobe but defeated by department-store price tags. And maybe you're keen for a holiday but unable to afford the transport and accommodation. A budget could be the answer. But it doesn’t mean you have to give up on the things you love. With our top five budgeting tips you can maintain your quality of life and build up your bank balance at the same time.
Keep an eye on your spending
It sounds like a no-brainer, but do you know how much you’re spending each week on coffees or petrol? You can’t begin to save money and budget if you don’t understand your spending habits, so track your cash outflow for a month and find out.
List your non-negotiable expenses
Divide your budget into fixed items (such as rent, a mortgage and your electricity bill) and optional or ‘discretionary’ items (such as subscriptions, take away coffees and eating out) and you’ll quickly discover the so-called ‘discretionary spending’ is where it’s easy to blow the budget. Break down your biggest discretionary expenses into sub-categories, such as entertainment, clothes and dining out, and ask yourself whether you can justify spending that amount on each category.
Introduce some discipline
It’s time to make some lifestyle adjustments and daily tweaks to rein in your spending. It’s not about giving up things but more about spending money smarter – finding a cheaper cafe for your daily coffees (some cafes will offer a discount if you bring your own cup – so you’ll be helping the environment, too) or limiting the number of new-release movies you rent on iTunes. Take your lunch to work, eat out less often and set a firm annual spending limit for clothes. If you’re not getting value out of a gym membership, give it up and consider other, cheaper ways to keep active, including walking to work if possible. And take a look at your utility providers, credit-card plans and other recurring expenses to see if you can find cheaper alternatives.
Make saving your top priority
Don’t fall into the trap of merely keeping what’s left over from your pay cheque in a savings account. A better way to get ahead is to quarantine a certain amount of cash as soon as you receive your pay check and make the remainder your budget for the week of month. That way you are limiting your spending capacity, without being tempted to make a call on your savings. For an added incentive, stash the money in a high-interest saver account, term deposit or other investment product (but always do your homework and seek professional advice if possible).
Re-consider credit cards
Don’t let the reward points and attractive advertising fool you: credit cards are a form of debt and making sure you pay off your balance before the interest kicks in is easier said than done. Keep it simple and pay for things with cash or a debit card and you’ll never be in danger of living beyond your means. According to comparison website Finder.com.au, in 2019, Australians put an average $26 billion on their credit cards per month, and the average balance was $3,231 per card. Depending on your credit card provider, the interest on a balance of that size can be up to $600.
Adhering to a budget doesn’t mean you have to stop enjoying life – in fact, being in control of your finances can significantly benefit your wellbeing. By understanding exactly where your money is going, you’ll find it easier to cut down on wasteful expenses and save where possible, helping you achieve your goals sooner.