Australians want and need to know how to save money and learn more effective budgeting strategies.
Background – budgeting
From petrol and groceries to mortgages and power bills, the cost of living has increased, and many Australians are finding it challenging to stay ahead.
In this blog, we discuss easy and practical penny-pinching tips.
When you get paid, break your money into separate buckets.
Many people say that when the money arrives in their bank accounts, they tend to spend it immediately
How can you change this behaviour?
It is all about separation.
When you get paid, split your money into separate accounts, or ‘buckets’, for different things.
For instance, if you have budgeted money for groceries, then every time you get paid, transfer that money into a separate no or low fee bank account with a debit card.
We recommend writing the words “groceries only” in bold letters on this card, reminding you of its purpose.
You should check periodically to ensure you put enough into your grocery bucket’.
Unrealistic time frames and limiting enjoyment are budgeting errors
There are many budget-related mistakes that people make, and the three most common are:
1. Having a budget that is impractical and destined to be challenging to achieve
For instance, to save $10 000 by the end of six months. Budgeting goals like this are vague, and they can also be unrealistic and challenging to achieve, given the ever-changing pace of everything.
Your situation will never be the same as the next person’s. When developing a budget, consider your personal lifestyle, values, and money goals.
2. Having a budget that mandates too much time to monitor and maintain
As previously mentioned, “bucketing” is one remedy to this.
Every time you get paid, put money into a separate account allocated explicitly for regular bill payments, such as phone, rent or mortgage, health insurance etc. Additionally, you should set up automatic payments for each of these recurring bills.
3. Not budgeting for enjoyable and fulfilling activities and purchases
People should surrender to the fact that they are likely to have a bit of a splurge now and then, and that’s normal.
Whether going to a restaurant for a nice meal or buying clothes for a special occasion, your budget must allow for this while still setting a limit.
For example, capping it at 10 per cent of your net weekly income, which is not much, but whatever works for you.
Set the air conditioning to 18-20 degrees Celsius throughout winter and turn off consoles to save power
There are many ways you can reduce your power usage:
- Set the air conditioner temperature to 18-20 degrees Celsius during winter
- Turn off computers and game consoles on the wall when you are not using them
- Switch to low-energy LED lighting. Some state and territory governments offer discounted energy-efficient lighting for renters, but you will need to check with your landlord.
- If possible, replace old, inefficient appliances with energy-efficient ones. Your particular state or territory government may also offer a rebate or discount if you do this.
- Do some comparative research to check that you are on the best plan and in a position to receive all the available energy rebates and concessions you are entitled to from your government
Many of you need to know how to save on groceries, mainly if you are on a vegetarian diet.
Save on groceries by unit pricing, which is even more compelling now because of the recent bout of shrinkflation. Also, effective to save money is regrowing bought vegetables
Unit pricing is an excellent way to compare different brands and sizes.
It is on the product label, called ‘price per 100gms’ or ‘price per litre’.
Bigger sizes tend to be less expensive overall, so can you purchase some staples like pasta or flour in bulk. As for non-staple items, you can go for smaller units.
We also recommended “regrowing” vegetables that you have already bought.
Spring onions, celery and potatoes can all be regrown easily if you have the time and the appropriate environment.
Kick-start your savings by setting aside 10% of your salary
For example, a person had just started her first full-time job and wasn’t sure what percentage of their salary they should be saving.
We suggest starting with 10%. You can always increase it from there, if appropriate.
It’s an option when you are unsure where to start.
If you are struggling budgeting and managing debt, consider consolidation or a partial waiver
For example, if a person had $78,000 unsecured debt, whilst having financial hardship arrangements in place, they are due to cease, leaving them in a difficult position to repay.
The options available to people in that circumstance depend on their lender and situation. The options include:
- A long-term hardship variation through which the repayments are reduced permanently and no further (or reduced) interest, fees are added
- A partial waiver or debt reduction, resulting in more affordable repayments to enable the person to repay the reduced debt in a practicable amount of time
- Consolidating debts, such as a personal loan, credit card and home loan, so your total repayments are lower.
- A combination of these and other measures
Vogue Advisory Group – we want to help our clients budgeting and save money to reduce stress in their lives
It is never too early to start to plan for the future. You may want to think about getting expert advice. Contact us, and our advisers can help you make informed decisions about your finances and plan for your future financial needs.