Budgeting to help you reach your goals
The beginning of a new year is the perfect time to get your finances in order. Whether you’re saving for a house, want to make extra repayments on your home loan or simply want to put some money away for a rainy day, setting and sticking to a budget will help you reach your goals.
Setting a budget doesn’t need to be a tedious task and allocating your income will certainly make you more aware of how and where you are spending your money. Get started by setting out your household income and expenses on a spreadsheet or use our simple online budget calculator. Don’t forget to allow for non-essential purchases—you may be able to cut back some of these, but if you cut out all your luxuries, you’ll be setting yourself up for failure. Overly strict budgeting can often backfire in the long run because it increases the chances of big spending splurges.
Pay yourself first
That said, you should set a cap on discretionary spending. One way to do this is to put some money aside every month for you to use on non-essentials. Once that is gone there’s no dipping into your savings or buying on credit. In order for your budget to work, you need to stick to it!
Start a savings plan
It’s always a good idea to put some of your earnings into a savings account, but even more so when you are looking at buying your first home. Most lenders will ask to see your most recent 3 bank statements showing regular deposits into your savings account.
Allow for savings in your budget and set up an automatic transfer from your everyday banking account into your savings account every fortnight or month, depending on when you get paid. It doesn’t have to be much at first. Keep saving a little at a time and you’ll be surprised how quickly it builds up.
Pay down your credit cards
According to the Australian Bureau of Statistics, household debt is on the rise. You can buck this trend by keeping track of your spending and putting aside a little cash every month to go on your credit cards or store cards. Another way to reduce your credit card bills is to change your account to one with a lower interest rate or no annual fee.
Review your bills
When is the last time you reviewed your mobile phone plan, insurance policy or electricity provider? If it’s been awhile, you could be paying too much for the service you’re receiving. There are a number of comparison sites you can use to look for a better deal, then call your service provider and see if they can match or better their competitors!
Take the hard work out of budgeting with our easy to use budget calculator
Benefits of budgeting
Aside from the obvious benefits—like saving for your financial goals—sticking to a budget can have other advantages:
Helps to reduce stress
Financial stress can affect your health and your relationships as well as your bank balance. Budgeting puts you back in control of your money. It takes away the stress of having to adjust to lack of funds because you didn’t plan your spending.
Makes you aware of your spending habits
When you set a budget you account for all your income and expenses. You get an understanding of what you can afford and puts you in a position to take real steps towards increasing your wealth.
Stops you wasting money
In organising your spending with a budget you can eliminate penalties incurred for late payments. Once you start looking at your spending habits, you might find other ways to reduce your living expenses and, before you know it, you’ll be that much closer to reaching your financial goals.
If you are considering refinancing or purchasing a new home, contact your friendly emoney lending specialist today.
We recommend you seek independent financial advice prior to making any decisions that could affect your financial security.
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