2020 has been a year like no other! With the new year upon us, now is the perfect time to consider your financial goals for the next 12 months, and the best place to start is with a good money management plan. We’ll share you some great tips in this article.
But first, complete this quiz to see how good your saving skills are. It’s important you don’t think about the answers too long, select the first one that comes to your mind. Ready? Here we go:
It’s payday! You just received your salary in your account. What do you first do?
A. Treat yourself to a nice meal. Don’t forget your favourite dessert. You deserve it!
B. You happily check your balance and start allocating money for your savings and expenses through the next period.
When you go grocery shopping you:
A. Go to the store with a general idea of what you need. You’ll figure it out when you get there.
B. Bring a grocery list of items you’ll need for the whole week.
How often do you cook at home?
A. A couple times a week.
B. Pretty much every day.
It’s been a tiring month at work. To your surprise, you received a bonus from your last project. Congratulations! What would you do with the money?
A. Buy that new phone that you’ve been eyeing for weeks or plan a vacation – it’s well deserved!
B. Deposit it to your personal savings bank account while you figure out how to allocate the money to your different savings funds.
You found a perfect apartment; however, the rent is way out of your price range. What do you do?
A. Take it, you’ll love it! You are working from home anyways, so you have already saved something from your commute. You need a nice place to be able to do your job… or two.
B. Continue searching. You may love it so much, but it isn’t worth going broke. There are a lot of cheaper options out there.
It’s your mum’s birthday this weekend. Your father decided to arrange a surprise celebration for her. You agreed on splitting up the expenses with your siblings.
A. You currently only have enough money to last you until next payday, so you paid for everything with your credit card and let your siblings pay you in cash.
B. You did the accounting duties. You took out the nominated funds you saved for your mum’s birthday and paid your share.
When your bill comes, you:
A. Put it aside in the drawer first then deal with on the day before the due date.
B. Check if the amount is correct and pay it immediately since you already have the budgeted amount saved.
How often do you borrow money?
A. Pretty often, but it’s not much, and I always pay them back.
B. Never in the past three years. People usually borrow from me.
How does your bank account look like the day before payday?
A. I still have a few dollars left and trying to hold on until the next pay arrives.
B. I have extra funds that I have saved from my current budget.
Please note that this test is not very scientific and is intended for fun, but it should give you an insight into how you feel about money and your behaviour towards handling your finances.
Let’s see how you did:
If you answered mostly A’s
Money, for you, is for spending and leading an enjoyable life. You have a great life – until your overspending catches up. If you’re in the spender category, know that you’re far from alone, but it’s not too late to make some changes. As much as you may loathe the idea of a budget, there is no doubt that drawing one up is the best place to start. Read further for our top ways to cut your expenses and increase your savings.
If you answered mostly B’s
You live and breathe the ‘B’ word. Budgeting is one of the most important financial habits you can adopt, so you are off to a great start! Read further to amp up your money-saving skills.
Here are some top ways to cut your expenses and increase your savings
Is the key to saving a home deposit as simple as giving up smashed avo toast for breakfast? Well, not quite, but spending less does make a difference.
On top of a budget, a savings plan and strategies such as a high-interest savings account, an effective way to save is to reduce or eliminate expenses.
Start by understanding what you spend money on
It can be easy to lose track of how you’re spending money, especially due to cashless payments and credit cards.
Many online banking systems include tools to categorise debits and make a budget – take advantage of them. Or download an app that helps you track your personal expenses on the go, like ASIC’s TrackMySPEND.
Find savings in the essentials
Some costs can’t be avoided – but many everyday expenses can be reduced. For example, you could:
- Move in with your parents/relatives or move into a cheaper rental or share house (short-term discomfort can pay off in the long term).
- Implement tactics like meal planning, making grocery lists and buying in bulk to save money on food. Set aside a budget for eating out/takeaway and stick to it.
- Shop around to reduce your regular bills – you may get better value if you switch or tell current providers you intend to change. Seek discounts for taking out multiple policies with one insurer.
- Use the car less: take public transport; carpool with colleagues; or try walking or riding.
You’ll be amazed at how quickly it all adds up to savings.
Make sure you’re paying off debts or credit cards completely each month or as much as possible, to avoid the added expense of paying interest.
Reduce common overspending
If you overspend on things like buying clothes, going out or expensive hobbies, it may be unrealistic to cut the expense entirely. Set a weekly or monthly limit and reduce that limit over time.
A survey of more than 1000 Australians showed that 73 per cent have a problem with overspending. In particular, people tend to go overboard when Christmas rolls around.
To reduce gift expenses, be like Santa: make a list (and a budget). Buy only planned items within your allocated budget – then stop! Ask your family for support; it’s easier to put a cap on gift values if everyone else does too.
Another common way Aussies overspend is on holidays. CommBank research has shown that a third of holidaymakers spent more on their trip than planned. Do your research and set a daily budget.
Costs that could be eliminated
Look for opportunities to eliminate costs. Cancel unused services. Update your internet or mobile plans if you’re always paying for excess data.
Ask yourself: are you actually using that gym membership? Are you getting value from your subscriptions? Remember, every wasted dollar is money you could be spending on your own home.
Finally, review and revise.
Our lives are continually changing and with this, so too do our financial needs. To make the most of your budget, it is important to schedule regular reviews. Assess your spending habits and make adjustments where necessary. By reviewing your spending habits, you may find areas where you are not sticking to the budget and areas where you can quickly reduce spending. It may be something small like working out at home instead of heading to the gym or cooking at home instead of ordering takeaway. These small changes will make a big difference over a 12-month period and will set you well on your way to achieving your financial goals.