Evie Zahos is one of Australia’s leading personal finance commentators with over two decades of experience on consumer finance topics, including banking, finance and real estate. She has a knack for making money simple. Effie shares her top budget tips and financial advice for getting the right financing Health mummy.
Living time has never been more expensive! With another hike in interest rates for home mortgage holders, and a crunch on rent, gas, electricity and expensive food, it’s really time for some practical financial advice.
As the cost of living continues to rise, inflationary pressures are expected to persist for some time. The Australians are now looking for ways to regain control. The good news is that with a little planning, you can. As the saying goes, “You can’t control the wind, but you can adjust your sails.” And your best tool when it comes to setting your sails is a modest household budget. Nobody really teaches you how to build a budget let alone manage one.
You are only expected to know how to do it. I actually cover the basics of budgeting in my book From Talking to Louboutins: A Real Girl’s Guide to Money. First, you have to look back before you can move forward. Print your bank statements online and highlight your expenses.
What you are looking for here is:
- Did I overspend in some categories?
- Need to review some of your home bills?
- Is your spending in line with your goals?
- Do you have a lot of “click and go” discretionary purchases?
This should give you a good idea of where your money is going. From here, you’ll be able to aggregate your costs into a formula.
Put your formula
There’s no shortage of formulas to help you manage your budget, including paying your bills on time and being able to take much-needed vacations. A popular option is the 70:20:10 plan. Here’s how it works. Divide your money between:
- 70% of daily living costs (rent or home loan, transportation, clothing, food and utilities).
- 20% to save (don’t skimp on savings)
- 10% for waste.
Next, prepare some buckets. Instead of collecting your “day-to-day living” expenses into one bucket, for example, open multiple groups (accounts) and give each a nickname. You may have one account for school fees and another for family bills etc. The same goes for savings. 20% can be split further between savings pools – 5% can go into a rainy day bucket, 10% into your vacation pool and 5% into your “getting ahead” bucket.
Using buckets inside buckets makes it easy to achieve multiple goals. You can assign a specific amount to each group, track your progress and adjust your budget for each goal. Choose fee-free online savings accounts with a healthy rolling rate instead of a short-term introductory rate, and you can’t afford to lose.
Can you cut costs?
There are few opportunities Regular bills wolfing down your pay packet. Guilty of adding too many streaming services during lockdown? Perhaps you can look into whether or not you can get a better deal, or perhaps a certain service quickly.
There are many simple steps you can take to reduce your expenses. Big ticket items like your home loan are where the big savings are, but even small savings can add up.
Can you earn more?
Don’t neglect your income. When it comes to making extra money, the sharing economy offers plenty of opportunities. You may decide to rent out your spare room, share your car, or pet sitting for the next cash boost.
I love your super
There is a significant gap between the pension savings of Australian men and women. Given that women tend to live longer, it’s important for us to make sure we have a comfortable retirement. One way to find out how to track is to use the Super Balance Detective online at the SuperGuru website.
Enter your date of birth, and the calculator says how much you need in the super today to reach the standard ASFA comfortable balance by age 67. It shows that a 35-year-old should currently have about $93,000 in the super.
Otherwise, go to the Retirement Planner on the MoneySmart website. It shows you potential income in retirement based on your retirement balance plus any old age pension payments. Whichever option you use, if your credit seems a little weak, it’s never too late to grow your pension through salary sacrifice, voluntary contributions, or joint government contributions. It can make a huge difference.
Let’s say a 35-year-old woman earns $50,000 a year and the average super-woman’s balance is $69,300. By adding an extra $1 to her super each day — that’s $30 a month, she can accumulate an extra $148,389 in super by the time she reaches age 67.
head to Super MoneySmart Online Calculator See how a few extra bucks added to your super can make a difference.
There are ways you can boost your super even if you’re not working out. Cash back sites like Super-Rewards cash you directly into your savings box once you shop on their platform.
How to save $580 a month
One of the easiest ways to recoup some savings is to take a look at Regular household bills – You can save up to $580 per week by switching from the average payout to the cheapest in the market. While cheapest may not always be best, it does give you a good idea of how much savings can be made by regularly reviewing your home bills.
Top budget tips and money rules to live by:
It is not what you earn that matters. That’s what you spend!
When you get a raise, sometimes it’s a matter of the more you earn, the more you spend, which then leads us to spend more on products and services, which in turn forces us to earn more. It’s a vicious cycle that most of us don’t realize we’re in.
Get rid of your money
Just like an organized home has a place for everything, so should you earn every dollar. The Aquarius System is a simple strategy to help put your finances in order. There is no shortage of budget formulas to follow, and a popular choice is the 70:20:10 plan. Another is the 60:40 budget plan.
Set your savings on autopilot
Pay yourself first. Set up regular automatic direct debit from your daily account to your savings. Transfers are timed to correspond to the days of payment. Always treat savings as a bill – they can’t be missed!
Budgets are not fixed
Some people don’t budget and become financially successful, while others watch every cent yet, due to their circumstances, continue to live from paycheck to paycheck. If you’re going to make a budget, you need to be honest with yourself about all those hairstyling appointments. There is no point in creating a budget that does not reflect your life.
If you are going to be on a budget, it is important to have an emergency fund attached to it. Otherwise, you are setting yourself up for failure.
Find out what makes you tick
Why are some people better savers than others? How do advertisers trick us with “mid-price” options? Understanding your financial psychology can save you money. Take the time to find out why you do what you do.
Don’t spend carelessly
Sleep on all impulse purchases for at least one night.
Identify your financial stresses and make a plan
Try not to overwhelm yourself. Make a list of all your financial problems and focus on managing one issue at a time so you don’t get overwhelmed.
Keep creditors in the loop
Contact your creditors if you are in financial difficulty and let them know how you intend to remedy these issues. Many companies have distress officers who can assess your situation and determine what help and strategy is available.
Create a cash cushion
The monetary cushion is strictly funded for emergencies only. Think job loss, medical illness, or an unexpected financial curveball.
The idea is that you have enough money in your pillow account to not only deal with the crisis but, in the event of a job loss, cover your basic needs (food, shelter, clothing – designer shoes not counting) until you find a job again. You should aim to have a few thousand dollars to support you during this period.
It can take some time to set up a backup account, and if you have a mortgage, it might pay to keep your savings there. For example, you have a $400,000 mortgage at 3.37%, and you save $50 per week. When you factor this into your home loan repo or offset facility, not only will you have $36,000 in the account after 15 years, but according to a Canstar analysis, you’ll save about $10,700 in interest on your home loan.
asking for help
If you don’t know where to start, call us for free National Debt Helpline on 1800 007 007. The National Debt Helpline is a not-for-profit service that helps people deal with their debt problems. We are not lenders, and we don’t “sell” anything or make money from you. Our professional financial advisors provide a free, independent and confidential service.
For more great family budget tips, check out The focus of the mummy health budget Go for tips, tricks, and budget-friendly offers from The Healthy Mummy Budget Squad.
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