Posted on 22/11/2019
In the lead-up to payday, do you ever find yourself broke and asking ‘where did all my money go?!’
If so, you’re not alone.
The latest Household Expenditure Survey from the Australian Bureau of Statistics (ABS) showed that the rising cost of essentials like housing, energy and education – plus our growing addiction to restaurant meals and takeaway (costing us an average of $95.05 each week!) is putting more pressure on our finances and pushing us into more debt than ever before.
So if you’re living from pay-to-pay with no plan for tomorrow, this simple guide to budgeting and saving will set you on a path to a more empowered and secure financial future.
A budget is an incredibly helpful tool that helps you keep track of your expenses, income and spending habits.
Aside from enabling you to pay off a credit card or loan, plan better for when your bills are due and save up for a holiday or big purchase, keeping tabs on where your money is going is beneficial for many reasons.
Budgets put you in control of your money – not the other way around. By being intentional about the way you spend and save your money, you can get off the treadmill of living from one pay packet to the next.
They are the key to staying focused on your money goals, by helping you avoid spending money on unnecessary items that do not contribute to your financial goals.
Plus, a budget helps you to put aside money for emergencies, and for those in relationships, avoid conflicts about how money is spent!
Where to start
When it comes to developing your budget, the best place to start is by breaking down the money that goes into, and out of, your account across a whole year.
At Statewide Super, our Financial Planners* suggest breaking down your costs into committed expenses, discretionary expenses and choice expenses.
Committed expenses are expenses which are necessary for your day-to-day life, and you’re unable to avoid. For example, this could be your mortgage or rent.
Expenses which are important, but you might be able to find a better deal or cheaper alternative are considered discretionary expenses. This could include phone and electricity bills, your car or public transport costs.
The final type of expenses are ‘choice’ expenses – or ‘nice to haves’ and luxury items. Things like eating out, recreation activities and fashion are all examples of areas you could cut back on to save money.
The best way to get across these expenses is to check your bank statements, bills, credit card statements, receipts and shopping dockets.
Once you’ve worked out your expenses, add in all the money that you receive over the year. This could include a salary from your full-time or part-time job, any casual work, your pension, government benefits, child support payments or income from investments. From here you will have a clear picture of where your hard earned money is being spent on a day to day basis.
Tip: Take a look at the ASIC Money Smart website for a handy budget planner tool – a great way to get started.
An important part of budgeting, as well as creating a more secure financial future, is to set goals for your savings and factor these into your weekly budget. This not only keeps you focused on the big picture, but also rewards you for the effort of saving.
It’s a good idea to break down your goals into short, mid and long-term goals, as this gives you both immediate gratification while still feeding your long term financial targets.
Short term goals might include a holiday, saving for a house deposit, paying off education costs, a major purchase such as a car or furniture or contributing towards an engagement or wedding fund.
Mid-term goals could include paying off your mortgage, funding children’s education, or enabling something like a career break for study, while long-term goals are related to retirement.
While short and mid term goals are important, it’s the long-term retirement goals that can often be neglected due to more immediate priorities.
So in your budget and goal setting, allocate appropriate weighting to these long-term targets.
Your budget outcome
With your expenses, goals and income taken into account, you should have a clear idea of your financial position.
If your budget shows that you're spending more than you can afford, also known as having a deficit budget, it’s not the end of the world but you may want to take action to correct this. Check your budget to make sure you've got all the amounts right and review your expenses to see if there are any you could reduce or cut out . You may find it helpful to seek some guidance from a financial counsellor at this time - they are free and can help you take control of your money.
On the other hand, If you have money left over in your budget, also known as a surplus, you may want to look at a long term savings strategy. One of the options you have for your financial future is to give your superannuation a boost.
Using Statewide Super’s interactive small change, big savings calculator, you can see the impact that putting away a few dollars a week can have on your total superannuation savings.
For example, if you’re currently a 50 year old with your super in Statewide Super’s MySuper investment option, you could save an additional $55,081 if you didn’t go out for dinner one night each week!**
Or, if you’re a 30 year old with your super in Statewide Super’s MySuper investment option, you could save a staggering $127,348 if you took your lunch to work 4 days each week!***
Who knew such small savings now could add up to so much in the future? See how much you can save for your retirement with this calculator.