Household budgeting is one of the most important (if boring) things one can tackle when you are trying to save.
There are countless books on the subject, many ideologies and sayings. Changing habits does not happen overnight, it is a process, but once in place these good habits set you in great stead, be it in saving for your first home, or just living a more prosperous life.
I hope to share some of the rituals I have found to be useful in saving
- Keep detailed track to start
First step is to see where you are, most have heard a friend or family member, or even themselves give the cry “I don’t know where my money goes!” Find out! Keep every receipt for a month, for every coffee, grocery shop or cinema ticket. At the end of the month go through twice. First, categorise as groceries, transport, bills, eating out and fun (any other topic you need as well) and then go through the groceries a second time to see what it is that you are spending on- how much went to unnecessary items? The cola, ready meals or sneaky chocolate biscuits? There is nothing wrong with this spending, but categorise this as treats and not groceries.
- Write a Budget
Now you know what you spending currently, make a note of all of the following for the month:
Your salary amount:
Expenses/bills (rent, electric, water, gas, internet):
Car Costs (repayments, insurance, registration, licence, servicing):
Insurances (health, pet, home):
Other Bills (Netflix, Spotify, phone plan):
Minimum Loan repayments:
Have a look at what is left, divide it into 3. First is savings, Second loan repayments- pay down that credit card! – and 3rd is for fun! Just because you are saving does not mean you shouldn’t go out with your friends or have date night, just do it within your budget. If you know that next week you will be going out for an event and it’s going to cost you more than one week’s budget, be frugal the week before- don’t pre spend then attempt to catch up.
- Have many accounts
One of the easiest ways to see where you are at with your finances is to spread your income out into multiple accounts. On pay day, divide up your paycheck into these different accounts to ensure your funds last. I know I am not alone in hearing the complaint “I live like a king the first 2 weeks, then am broke till the end of the month!”
It helps to set up internal automatic payments to regulate.
Ensure one account is labelled for bills. The benefit here is when that bill for the car registration comes, the money is waiting there and can be paid without having to have a tight month trying to quickly save before the due date. This account will slowly grow over time as most bills are not monthly, which may mean the first couple of months this account doesn’t run smoothly- but stick with it!
Have a second account for groceries and everyday spending. This account gets your allocated amount for groceries, fuel and fun moved in to it weekly. At the end of the week if there is an additional amount you can chose to save this for an upcoming commitment, put it into savings or spend on yourself.
Savings account, I do two payments into this. One is your accolated savings amount at each pay, then I top this up with any excess funds I have at the end of the month from my everyday account. Your goal should be to save 3 moths salary, there are few circumstance where this amount will not get you out of a sticky situation, be it unexpected medical bills or loss of employment.
Any others you can think of! Label an account for holidays, date night, that pair of shoes or your first home. Label it with your goal and just little by little add to this, it is a great incentive to see what you are saving for and encouraging to watch this balance grow.
Now you are organised, you can look for money saving strategies. Here are some tips:
- Ditch the coffee habit. This is not news, I am sure we have all heard it. But 2 coffees a day ($10) each working day adds up. Assuming you work 48 weeks a year this totals $2,400 a year. Have your coffee at the office, bring from home, or treat yourself only on the Friday morning to that bought coffee; your pocket will thank you.
- Re-evaluate monthly costs. Have a look at your car and health insurance, are you getting the best value? Shopping around can be time consuming but can save you a lot of money in the long run, gas providers are also very willing to negotiate when compared. This extends to internet, phone plans (do you need to upgrade your phone, or can you keep it on a sim only plan for a while longer?) and credit cards.
- Pay bills yearly. By setting up your “bills account” you can save in smaller, less painful increments. Having this balance sitting there will mean you are able to pay bills such as insurances yearly, which usually gives a discount- better in your pocket than theirs. I recently saved 10% on my car insurance paying a year upfront over the monthly direct debit I had.
- Shop and cook smart. Shop the supermarket sales, buy meats on sale and freeze them, bulk out cooking with extra veg (adding lentils to mince meat dishes is excellent for this) and buy in season. When you cook, do so in bulk and freeze leftovers for lazy meals to give yourself an alternative to take away when cooking is unappealing. These are little things that add up; in our home I feed 3 adults for $150/week total- this is very achievable.
Good money habits and a positive relationship with money is important no matter your income, and it is true when they say if you are living paycheck to paycheck on $50,000, you will do the same on $100,000. When you understand and master being able to live within your means and have a regular savings habit built into your budget, you have the ability to not only the weather storms and the unpredictable, but also to advance and save for your future- to escape the “rent trap” and buy your first home or investment property.