Gain Financial Control
Curbing your spending and calculating a budget is no fun for anyone, but it's a necessary evil and the sooner you gain control of your finances, the better. If you change your mindset from worrying about the short-term cuts to focusing on your long-term goals — maybe you're saving for a house deposit, a new car or an overseas holiday — you'll find budgeting a whole lot easier to deal with. One less coffee a day could mean a great holiday at the end of the year, so look at the positives and cut down your wasteful spending.
Calculate your income
Before you write up a budget, you need to work out exactly how much money is flowing into your bank account each week, month and year. Sit down and draw up your salary payments after tax, plus any other income you may receive from investment properties or child support, etc.
Assess your expenses
This is the scary part! Rather than trying to remember everything off-hand, the most accurate approach is buying things as per normal for a week or so and noting down every expense. You might be surprised by how many times you throw an extra treat in the shopping basket. Once you have all of your expenses written down, draw up two separate columns and categorise your expenses into "essential" and "non-essential." Essential expenses would include things like rent, electricity, etc, whereas non-essential might be your morning coffee, magazines and movie tickets. Make sure you remember to include other items like interest on your credit card or loans.
Look through the two lists to see where you can make changes. Even small adjustments can have a huge effect over the long term. Some easy budgeting ideas include:
- Take leftovers to work instead of buying your lunch, even if only every second day.
- Make coffee in your work kitchen instead of buying one at your local cafe each day.
- If you buy a particular magazine every month, save money by ordering an annual subscription or reading the articles online.
- Plan out your weekly meals in advance so you avoid buying mid-week takeaway.
- Opt for more dinner parties at home instead of going out to restaurants.
- Buy a set of dumbbells and take a walk around the block instead of paying for gym membership.
You could also consider taking up a second job or sourcing additional funds. For example, you might like to take up a regular babysitting job one evening a week or do some freelance work on the side.
Also think about if you're making the best use of your savings. Are they just sitting in your usual account, earning minimal interest? Shop around to find a good savings account that offers a high interest rate.
Stick to it
Be realistic. If you curb your spending too much, it's less likely you're going to be able to stick to it, whereas building up slowly will allow you to get used to restricted spending and become comfortable with the change in mindset.
By writing everything down and setting clear goals, you'll be holding yourself accountable. Some pictures of your financial goal (that dream house with a pool, or bungalow holiday package in Thailand) may also offer added motivation and help you stick to it.
Sit down every six months or so and re-evaluate your budget. Are there other areas you can cut back on or are you finding particular cuts too difficult? As your life changes, make sure your financial budget reflects that. Take a look at your credit cards and current bank accounts, and assess whether they're still the most suitable options for you.
Just like you need to reward yourself every now and then if you're sticking to a diet, you also have to grant yourself small allowances when you're trying to save. For example, if you save a certain amount for three months, why not set aside a small amount buy a new dress? Good luck!