One of the most important steps you can take on the road to financial security is to prepare a sustainable budget beforehand. This will help give you the foundation you need to build an effective financial plan that is realistic, achievable and tailored to your own individual circumstances.
Budgets are a vital aspect of financial planning because they identify the capacity you have for saving and investing. By taking a closer look at your income and outgoings, it’s easier to identify surplus cashflow that could be used to reduce debt, save for the future and bring your financial goals one step closer.
To get started, request a budget planner from your Financial Adviser or alternatively, you can search online, visit your bank or find a personal finance app that includes one.
Once you’ve got your budget planner, you should block out some time for the task, and be prepared to look honestly at your spending patterns. Budgeting needn’t be complex, and revolves around two straightforward questions:
Firstly, list all forms of income. As well as salaries, consider other forms of income such as interest on bank accounts, share dividends, child support, Centrelink payments or rental income from investment properties.
Start with all the regular outgoings such as bills, home loan payments, travel expenses and groceries. Then consider any annual or occasional expenses like holidays, birthday gifts, restaurant meals or vehicle servicing.
If you have more money coming in than going out, the surplus can be used for investment or savings purposes. That’s a great position to be in, and the next step is to talk to an Infocus Financial Adviser who will help you make the most of it.
If you are only just covering your outgoings, or have more money going out than coming in, it’s time to look at ways to boost your income or cut back on your spending.
Taking on a part-time job or renting out a spare room to a student are two ways you could give your household income a boost – but you may find it is easier to save money than it is to make more.
Most of us spend money on things that are ‘nice-to-have’ rather than ‘must-have’, so there are some simple savings to be made. Small changes can make a big difference to our disposable income over time. For example, if you stop buying a coffee on the way to work each day, you could potentially save $1,300 per year.
Once you’ve isolated some savings, it’s time to put this surplus cash to work for your financial future. Here are some tips for successful saving:
There are plenty of other ways to cut your outgoings. Keep the following tips in mind and you’ll soon see your weekly or monthly outgoings drop.
It’s also a good idea to look at the way you are using loans and credit cards and ask yourself if you’re paying more in interest than you need to. Here are some tips for reducing exposure to interest:
In essence, good budgeting comes down to common sense and discipline. So it’s important to be realistic about your spending, and not set yourself targets that you can’t reach.
For instance, you are better off switching your weekly cinema trip to a day when entry is cheaper, than it is to decide not to go at all. Similarly, planning to live on baked beans is not practical, no matter how much money you might save.
Above all, remember that budgeting is all about bringing the best out in your situation. Small sacrifices you make now could lead to a brighter financial future down the track.
Information on this site may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product.
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