7 simple tips for managing your money better.
If you’re a wee bit over being told your avo on toast habit is the reason you can’t afford a home in inner Melbourne, you’re not alone. Rest assured, there’s no tut-tutting here. Only 7 simple tips for managing your money better.
Read on for proven ways to stretch your dollars and make the most of your money, courtesy of our award-winning team of accountants and financial advisers in Fitzroy.
1. Understand where you are.
First things first, it’s important to take stock of your current financial situation. How much are you earning? Be sure to include your salary, and funds from any side hustles or investments.
Next – figure out where your money is going. Are you paying off loans or credit cards (or gasp – those dreaded buy-now-pay-later account balances)? Have you been spending more on coffee and take away than you thought?
Be honest. This first step is not designed to make you feel guilty; there’s not much to do about the past. It’s about getting a clear understanding of your income and spending habits so you can get some strategies in place to target key areas for improvement for the future.
2. Get budgeting.
If budgeting sounds daunting, it may be time for a reframe. At its core, budgeting is just making a plan for your money. It helps you decide where you want to spend it, identify and eliminate hidden costs (think: account fees and unused subscriptions), and find new ways to save.
While we know not everyone gets excited at the thought, creating a budget doesn’t have to be painful.
Put yourself in charge and personalise your approach. If you’re more of a traditionalist, start with pen and paper. Love Excel? There are plenty of spreadsheet options. Looking for something more convenient and mobile? There are tons of great apps for budgeting and expense tracking.
Regardless of the tool you chose, take time to really capture your income streams (work, supplemental, rent assistance, etc) and expenses (bills, utilities, rent/mortgage, car payments, entertainment, food and drink, clothing, memberships etc). Gather as much information as possible at the outset to give the most accurate reflection of where you’re at.
As a side note: if you’ve got more complex budgeting and cashflow needs, like numerous streams of income, complex loans or maybe have your own business or investment properties, it’s probably worth chatting to one of our award-winning financial advisers.
3. Don’t set it and forget it.
Once you’ve got your budget sorted and know what cashflow looks like, it’s time to set yourself some guide rails. Like calories-in / calories-out, to stay financially healthy, you want to make sure your earning and spending are balanced most of the time.
If you spend as much or more than you make on a fairly regular basis, it could be time to tighten your belt. Or maybe, bring forward that conversation about a raise with your employer.
If you’ve got a healthy little war-chest, perhaps there’s something more you could be doing with your dollars; things like saving for something special, donating to your favourite charity or putting your spare cash into ethical investments.
Whatever you do, what’s most important is to do is check back in regularly – at least weekly. There’s no point doing all this budgeting work unless you keep things on track. With a little discipline at the start, soon it will become a built-in part of your routine.
4. Pay yourself first.
While it may seem counterintuitive, ‘pay yourself first’ is an age-old savings tip that works. There are a few ways to do this but, in each case, the idea is the same; set aside money right after you are paid. Treat it as a non-negotiable payment, like you would a recurring bill.
Once you’ve done your budget, you’ll know the right amount to put aside that ensures you can save and still cover your regular expenses. The process can easily be automated. Just set up an automatic transfer from your pay into your savings account.
An added benefit of setting aside money? You’ll also build a buffer for the unexpected; alleviating the stress of ‘finding’ money when your fridge gives up just before the in-laws arrive for the weekend.
5. Sort out your super.
If you’re working in Australia, your employer is popping 10% (10.5% as of July!) of your earnings into your nominated super account.
But where is all this money going? If you’ve had a few jobs and just opted for your employer’s default account, you may find you’ve got several super accounts under your name. This means you may have extra money floating around out there, and are probably paying account fees for the privilege.
The best course of action is to get some assistance to consolidate your accounts and hunt down any lost super. Our team can help you with this incredibly easy win.
Once you’ve got a read on how much money you have in your account, the next step is to really understand what your money is doing.
What’s it supporting and is it doing good in the world? If that matters to you, be sure to hunt down a super fund that aligns with your goals and values.
Buyer beware: this is harder than it sounds and the ethical investment space is ripe for ‘greenwashing’. So be sure to dive into the data, read the product disclosure statements and check the fine print on credible authorities like the RIAA.
6. Waste not, want not.
When it comes to managing your money better, one of the easiest wins is to waste less.
In Australia, we throw away up to 20% of the food we buy (that’s 1 in every 5 bags of groceries!). Not only is this a huge environmental cost, it also means 20% of the money we’re spending on groceries ends up in the bin.
So make a weekly meal plan and create a grocery shopping list. These small, everyday changes help drive bigger impacts – both for the environment and your bank account. Planning what you need, and buying accordingly, not only helps curb food waste, it also reduces decision fatigue and the urge for last minute take-away.
Need a little inspo for other changes you can make around home? Check out our guide for going beyond “switching off,” inspired by Earth Hour but relevant all year long. From hanging laundry to dry to extending the life of your devices, our handy guide is full of tips that help you waste less and save more.
7. Fighting the urge to splurge.
With all that saving, it might be tempting to treat yourself. And while the occasional treat is encouraged, cutting back on emotional spending, learning to say no and choosing experiences over things are all painless ways to save more and splurge less.
Emotional spending (also known as impulse buying or retail therapy), is increasingly common in our consumer-driven society. With algorithm-based advertising a mainstay of social media, we’re targeted by marketers more than ever. And it’s deceptively effective.
The buying high is temporary, but the damage to our bank accounts can be more lasting. This is especially true if our emotional spending becomes a frequent outlet for the myriad of feelings we’ve been experiencing, say in response to an ongoing, global pandemic. Just two $10 impulse buys a week quickly adds up to $1,040 a year. That’s money that isn’t going into your savings, paying down debt or being put toward investments for your future.
Learning to say no to yourself (or your kids), can be challenging. But, it’s a muscle you can build. Here’s how…
How to avoid impulse buying.
- Recognise the signs.
- Take a pause before you buy – in the shop or online.
- Revisit your items and quantify your spend and the value you can expect.
- Aim to collect experiences, not things.
The first part is recognising the signs of emotional spending. If you find yourself running out for one item but returning home with multiple things on a regular basis, it could be a sign that impulse buying has crept in to your habits.
Try this next time you’re out. Hit pause before purchasing. Wait 10 seconds before deciding to put an item to your cart. Or, review your items before getting in line to pay.
Take the time to revisit what you came in for and what the additional items will cost (in terms of dollars now, and cumulatively across the month or year). Are there other, more valuable things you could be putting this money towards? What are you forgoing by splurging today? Thinking through purchases methodically can help you decipher which things are necessary, which add lasting value and which maybe should be returned to the shelf.
The same goes for online shopping. Add items to your cart and then wait 24 hours. Forgot all about them? Great! Chances are you didn’t really need them in the first place. Sometimes hunting an item down is enough to satisfy the craving.
Lastly – if you are going to make a purchase, aim for experiences over things. It’s easy to accumulate stuff, but psychology research shows experiences bring us more happiness than our possessions. And aren’t we all a little hungry for experiences after a couple years at home? Sidebar… have a look at what’s on in Melbourne right now!
So, if you’re looking to splurge less and save more, try to slow down and ask yourself some pointed questions before spending. The more selective you become about your splurges, the more you’ll be put towards the things that you truly need and that will bring you longer term joy and meaning.
Need a hand?
If you need a hand with building a budget, finding your super or getting a good financial plan in place for your future, chat with our team.