Save Smart – Tips to Create and Stick to Your Budget

Picture this: you’ve found the perfect home, it’s everything you’ve ever dreamed of, but it’s just outside your price range. You need a deposit quick, so you decide to start budgeting. Where do you begin?

Whether you’re saving up for a home loan deposit, keen to cut costs to help with repayments, or just trying to get back on track after an expensive holiday season, learning how to budget is an immensely valuable skill that can serve you throughout your life. Here are our top tips for mastering the art of budgeting

1. Keep track of your money
   First and foremost, it’s important to be aware of what you’re spending your money on, so that you can identify areas where you might be able to pull back and maximise your savings. Create a log that keeps track of both your income and expenses. A spreadsheet or journal might make this easier as you can track how much you’re spending weekly.

   Log every purchase you make, every bill you pay, and any income you receive after tax and super. After a month, break your expenses into categories, such as food, entertainment, lifestyle and fitness, transport and bills. See how much you’re spending in each area and identify where you can make changes, whether its unsubscribing from a streaming service you haven’t touched in months or talking to your mobile provider about a better deal. This log will make it easier to recognise where you could be spending smarter.

   Apps such as Up, Beem and even the ATO app can help you master your finances and budgeting, so utilise the ‘smart’ aspect of your smartphone and have it save for you.

2. The 50-30-20 rule
   Once you know where your money is going and how much you’re spending on what, you can distribute your spending accordingly. One way of doing this that is worth considering is the 50-30-20 rule. This rule stipulates that necessities such as rent, amenities, bills, insurance, and groceries should make up 50% of your budget. These are the things you can’t avoid, though you may be able to find better deals if you shop around.

   Your wants, such as eating out, exercising, entertainment, and indulgent purchases, should make up 30% of your budget. It’s of course important to still enjoy yourself, so don’t remove all your wants from your life. The remaining 20% of your budget is then allocated to your savings account. This should help your savings grow and make sticking to a budget significantly easier.

3. Split your income
   Speaking of savings accounts, another budgeting tip to consider is diverting your income into separate accounts when it lands each pay day. For instance, you could allocate a portion of your payslip to your commitments and necessities account, to pay for bills, rent, and groceries, and then do the same for your ‘wants’ account, so that you can cap how much you’re spending on indulgences. Lastly, the third account could be a savings account you rarely touch, that 20% of your payslip is allocated to each pay day. These savings will accrue interest over time.

4. Work towards a goal
   If you have an aim, such as a home loan deposit, this tip may already be in play, however, if you’re just saving for the future, it’s wise to put a goal post in place. You can use your savings goal to adjust your budget. For instance, if your goal is to save $40,000 in 2 years, you can easily work out that you need to put aside $385 a week. You can then adjust your discretionary spending to help accommodate this.

5. Be flexible
   No, this doesn’t mean abandoning your budget every few weeks, but it’s important to recognise that things can change. Your landlord might increase your rent, meaning you have to adjust your budget to accommodate this, or you may get a pay rise at work, meaning you have more spending money or additional funds to put into your savings account. Your financial situation will change over time, and your budget should reflect this.

Following these quick tips may help you establish healthy budgeting habits, setting you up to be a savings superstar. Here at MoneyQuest we have a custom designed ‘Budget Planner’ that provides an overview of your income and expenses, and of course our team is always ready to assist with your personal finance needs.

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