You would never expect to win an Olympic gold medal without having a training plan in place. So why do we expect to be on top of our finances without budgeting properly?
Budgeting is an essential tool which helps you afford the things you want and need while staying out of debt. Budgeting should be second nature to every Australian who earns and spends money. However financial literacy, proper money management and budgeting skills are not taught to us at an early age so by the time we are earning cold hard cash, we don’t really know what to do with it.
Budgeting can help you keep track of the money coming in compared to the money going out and can help you find areas to save and areas where you could be spending more to get ahead.
What does budgeting do?
Budgeting won’t stop you from spending money or missing out on life’s little luxuries. Instead, budgeting should help you to be able to afford nice things without leaving you short.
Through proper budgeting you will take into account all the money you are earning from your wage, government benefits, investments and inheritance and divide this money to ensure it covers your commitments. Your commitments include utility bills, loan repayments, credit card repayments, utility bills, school fees, car maintenance costs and anything you have committed your money to.
It will also look at your expenses such as food, petrol, clothes, shoes, hair dressing, entertainment and leisure costs. Anything left over can then be invested, saved or used to pay off bills sooner.
Budgeting – A How to Guide.
Budgeting has a reputation for being hard to do, but once you get started, you will not know how you ever lived without a budget to begin with. To create a budgeting plan which is easy to stick to, you need to be honest with yourself. Now is not the time to be modest about how much money you spend on cigarettes or how many times you go out for dinner a week.
You need to know exactly how much money you spend so you can find areas of improvement. If you are shocked by how much money you are spending on a particular thing, like cigarettes, it will inspire you to cut back and you can then use those extra funds on other areas such as paying off debts or starting a savings account.
You also need to prepare for the worst. If your income is not steady, plan your budget around the lowest amount you earn. Any extra money you make over the weeks can be saved because you have everything covered with your base income. Another budgeting tool is to spread your regular monthly bills out.
If you are paying $80 a month for your phone you are losing a big chunk of one weeks pay to your bill which can put you behind in your saving. Instead, set aside $20 a week so when the bill arrives you have the funds and you aren’t cutting yourself short.
Where to start budgeting
Budgeting is the first step towards financial success. Knowing exactly how and where to dedicate your income can kick start your personal wealth management skills and open a world of opportunities to you. For professional help with planning a budget subscribe to the Save on Bills Newsletter. Save On Bills will send you a weekly email jam packed with savings tips, budget advice and ways you can earn and save more money around the home.
For a step-by-step budgeting plan and software click here for more information on the Save On Bills Program.