Sometimes the hardest thing about saving money and creating your budget plan is making the first step. Calculating your expenses, prioritizing the important spendings and making a plan is the biggest and most important step when starting out on creating a budget.
There are always going to be some expenses on which we cannot save, but making little adjustments and prioritizing your spendings can significantly help to create a strong budget plan that will help you save the desirable amount.
A good budget plan will only work if you will stay consistent, record your spendings and stay motivated to reach your goals.
Australia is one of the top 10 most expensive countries to live in, with a population of over 24 million only 57% of people have a savings plan. Most of the Aussies choose to save for holidays, property, vehicles, education, emergencies, new appliances, and electronics. Setting a goal and time frame helps most of the people sticking to their plan. Those who are saving without a set purpose are most likely to be unsuccessful with their budgeting.
Have a savings plan – to know how much to set aside to reach your goal successfully;
Record your expenses – write down your regular expenses and see what your spending habits are;
Set your goals – having a purpose and something to look forward to will increase the chances of reaching your savings goal;
Pay yourself first – prioritize savings before any other bill, purchase or spending;
Reduce energy costs – these essential payments cannot be avoided, but they can be adjusted and reduced.
1. Have a savings plan
Creating a savings plan is the first and the most important step to make when deciding to save up. Marking down how much money you spend, deciding on your goal and letting go of some spending pleasures in order to turn them into savings can be a hard process.
Having a savings plan increases the success of saving up to 75%. If you have created a strong plan, recorded your expenses and decided on your goal, putting away money will be much easier. With a savings plan, you will be able to stick to your goals and follow your achievements. A savings plan can help visualize the time frame as well as the amount you wish to save. Give yourself a set timeframe for your goal and decide on the amount you wish to put aside every month. Do not make a mistake by setting your goal too high, make sure to make it reasonable. Most importantly – make sure you stick to it!
2. Record your expenses
Decide which expenses are essential to your everyday life and where you are able to cut back. Whether it is the gym membership you don’t really use, ordering takeout or spending too much time and money on online shopping. There must be at least a few non-essential spendings where you are able to cut back. Divide your payments into essential and non-essential groups. Pay your rent, utility bills, and medical expenses and make these payments a priority. The non-essential payment group will play the biggest role in your savings plan, this group will show you the things you can learn to live without. Have a cup of coffee at home instead of a coffee shop, use public transport or walk instead of using a taxi, make a home-cooked meal instead of going to a restaurant or ordering take out and then evaluate if you can live without these pleasures and how much more money that leaves in your wallet.
3. Set your goals
Decide what you are saving for, whether you want to go on a trip, buy a new house or buy that dream car, this goal can be turned into a number. A goal will show you how much money you need to save and in what timeframe it can be achieved.
Short term goal – it can be saving up for a holiday, new electronic device or down payment for a car or a house. The short term is usually 1-3 years and this goal is the easiest to achieve. Short term goals take a little less planning but nonetheless requires consistency and motivation.
Long term goal – will require more planning, this goal is set to be achieved in 4 years or more. Long term goals can be a retirement plan, education for your children or buying a house. These goals require extensive planning and preparation as well as a large sum of money.
4. Pay Yourself First
Make your savings a priority. Many people pay their rent first, then follow the utility bills and other expenses and if there is something left this money goes to their savings. If you are truly motivated and want to reach your goal on time we recommend paying yourself first, meaning – put the set amount in your savings account before anything else. Treat your savings as a bill that must be paid to your savings account, after this, you can manage your rent and other mandatory expenses. You can even create an automatic savings payment which will not allow you to think twice before changing your mind and spending the money on anything else. Paying yourself first ensures that you stick to your goals and contribute to your savings plan as promised. The Paying yourself method has been recommended by many financial advisors as an effective method that helps achieve the desired goal.
5. Reduce energy costs
You will not be able to get out of paying your rent and utility bills, but you can use the energy you spend in a smarter way.
Lower your electricity bill – lower the temperature, purchase only energy-efficient electronics and appliances, make sure to turn off the lights as well as non-essential electronics when not used, these are only a few tips on how to lower your electricity bills.
Pay attention to “time-based electricity rates”, some companies charge more for the energy used in peak hours. There are many people who turn on their dishwasher at the end of the day after finishing dinner, charge their electric cars coming home late after work as well as charging their electronic devices overnight. Energy companies take note of these habits and apply higher rates during the evening, we recommend shifting your power use.
Save water – turn off the tap while brushing your teeth, try using rainwater to water your plants and take shorter showers, these tips might seem insignificant, but they might add up later.