Whether you’re a spender or a saver, we can all use a little help when it comes to getting our finances in order. Here are 5 steps to help you get started.
Start with a spending diary
Keeping a spending diary is a great place to start so you can see where your money is really going.
If you’re one for pen and paper, buy a small notebook, or if you prefer a spreadsheet, go digital.
Figure out what your weekly expenses are and track all of your purchases – everything from that morning coffee to your power bill, it all adds up. You could also print out last month’s bank statement and label your purchases.
Want someone to do it for you? Westpac has a free app, CashNav, which automatically tracks your spending and gives you notifications in real time so you know exactly where your money goes.
CashNav categorises your purchases into things like ‘eating out’, ‘shopping’ and ‘groceries’, and identifies trends so you can see where you’re over spending and areas that you can save.
Once you have your month worth of spending, categorise your items into ‘wants’ (takeaways, that new pair of shoes etc) and ‘needs’ (groceries, rent etc). Make a list of 10 ‘wants’ that you can live without.
Create a budget
Now you know what you spend your money on, and you’ve found some things you can do without, it’s time to make a budget and work out how much you can save.
Your budget is made up of three parts, income, expenses, and savings.
Income: This is the money you have coming in – salary, extra cash, anything that you earn money from.
Expenses: Use your spending diary to work out your fixed expenses – these are your needs. Make sure you take into account everything from transport costs and rent, to utility bills, debt repayments and insurances.
Savings: When your expenses are subtracted from your income, you can work out how much money you need to keep as a buffer and how much you can save.
We’ve put together a handy budget template to help you get started.
Set goals! Now make your savings plan
So, you’ve tracked your spending, created your budget and now you can start to think about your savings as goals – what do you want to achieve, how much do you want to save and what’s it for?
Setting yourself a savings goal can help you keep on track. You can even name your bank account with the title of your goal, such as ‘Island time’ or ‘New wheels’ to keep you motivated.
Watch out for ‘the leak factor’
The ‘leak factor’ is a slow leak in your finances where small but regular spending gradually wears away substantial amounts of your money, without you even realising.
Have you got a leak? As an example, you might be spending $20 a week on bought lunches, which you’ve allocated in your budget. Try taking leftovers from the night before, or a new recipe to revitalise the packed lunch.
Remember that $20 a week turns into $40 a fortnight, so with 12 weeks of lunches saved, you could have half an airfare in savings to go towards a summer holiday.
Identify the leak, adjust your budget, and turn your leak into savings.
Create good saving habits
Lastly, to help you stay on track with your budget keep these tips in mind and you’ll be reaching your financial goals in no time:
Think about the consequences of your purchase before you buy
Try to keep savings separate from spending money for example in a savings account
Prepare for the unexpected and have a buffer should you need it. Label one account as your ‘emergency fund’ to be used for things like car repairs, medical expenses etc. so you don’t have to dip into your savings
Try not to touch savings unless it’s absolutely necessary
If you are saving for something special, try saving more than you need to achieve your goal so you’ve got extra money just in case