A budget can be a handy tool to help you reach your savings goals, whether your goal is a home deposit, a holiday or emergency pocket money. Determining a goal can help motivate you to begin and following the below steps can help you achieve your goals.
Step 1: Calculate income
Record your income by determining how much you receive, where it comes from and how often you receive this income.
This could be in the form of wages, government benefits or investments.
Step 2: Tally your expenses
Look at your bank statements and create a list of expenses, this should include what the expense is, how much and how often.
There are three types of expenses:
- Fixed expenses:
- Mortgage or rent payments
- Utilities such as electricity, gas, water, and phone bill
- Council rates
- Groceries
- Medical costs
- Insurance
- Transport costs
- School fees
- Subscriptions
- Debt expenses:
- Loan repayments
- Credit card payments
- Unexpected expenses:
- Car repairs
- Pet costs
- Medical fees
Step 3: Compare income to expenses
Look at your total income compared to your total expenses. If your income is greater than your expenses, you’re in luck, you have extra money to put towards your savings goal and spending money. If your expenses are greater than your income, see if any of your regular expenses can be reduced. Maybe having both Stan and Netflix aren’t a necessity, or if you can cut out Uber Eats.
Try and reduce your expenses where you can, the less you spend, the more can go towards your goal.
Step 4: Set a savings goal
This is the part where you determine how much you’ll save each week, fortnight or month – for example – $200/fortnight. It’s important to set a realistic goal that you know you can achieve, to avoid being discouraged.
Step 5: Spending money
The remainder after expenses and savings is spending money. While saving you can still enjoy going for dinner on Saturday night or catching up with friends for a coffee, so make sure to set some money aside to allow for that. However, do keep in mind the more spending money you have, the less money you will have for savings.
Step 6: Update your budget regularly
It’s important to ensure that your budget reflects your true spending habits, so update your budget at least once a month so you’re not left wondering why you’re not saving.
The more you stick to your budget, the easier it is to save. Then before you know it, you’ll have reached your savings goal, which is the ultimate reward.