We don’t have to tell you that the cost of living is biting Victorians hard at the moment. Financial stress is running high, and people are feeling the pinch. If you haven’t thought about making a budget before, here is our comprehensive guide to personal budgeting so you can achieve financial freedom and set your sights on something greater.
The Foundation of Financial Well-Being
How do you know if you’re winning or losing if you don’t keep score? If you are finding yourself short of money each month to pay bills, rent/mortgage, groceries, and so on, chances are you aren’t tracking what comes in or out of your bank account.
A budget can help you keep on top of finances as well as provide a buffer for emergencies if and when they come to pass. If you’re already in debt (as many Australians are) it provides a pathway to financial freedom, which can be useful if you have major asset purchases in your sights such as cars or your first home. This can be a goal you can work toward – which makes the sacrifices all the more worth it.
Creating Your Financial Roadmap
There’s no use creating a razor thin budget that you won’t stick to. Depriving yourself of luxuries for no reason can actually be counter-productive and see you give up. Your budget should have a goal that’s achievable, measurable, and has a time limit, as we mentioned earlier. This could be saving $2,500 over a year as a cash deposit for a car (about $200 per month.)
Understanding how much money you make each month and where it all goes is crucial. You can then cut unnecessary spending by figuring out how much money is spent in various areas. Your NetBank app may have this feature, or you can use a spreadsheet, detailing different “buckets” of spending and how much is spent each month. Using this as a baseline, you can start redirecting your money to savings, debt reduction, or your financial goal.
Smart Strategies for Saving and Investment
The economy works on investing “other people’s money” into ventures that make a return. Your money can also be worked harder by investing it into property, shares, or even yourself – buying a car could mean opportunities for jobs further away from home are now available to you. To ensure you stay on track with your saving, you may want to use micro investing apps such as Raiz or Spaceship – once you invest the money into a big investment fund, it takes three to five days to divest your money, which rules out impulse purchases and emphasises withdrawals for emergencies only.
If you have many small debts with high interest rates, you may want to consider taking out a personal loan to consolidate these debts and pay them off bit by bit – which can also (over time) improve your credit score.
Budgeting Tools and Resources
If you need help with budgeting or finances, there are many free resources available such as ASIC’s MoneySmart or financial counselling services provided free by charities. Many bank or credit union apps also have simple budgeting or spending trackers to keep you accountable. Other strategies include opening secondary accounts for saving or spending to ensure there’s only enough money for the essentials, bills, your savings goal, etc. Whatever is left over can be saved, invested, or spent on luxuries as a treat. Though following a budget can be a big lifestyle adjustment, it also leads to greater financial rewards in the medium-to-long term, especially when the cost of living stabilises. Your future self will thank you for it!
