Budgeting is your friend – here's why

And how it is possible to enjoy the good life while tightening the belt

We all know how easy it is to spend what we earn, even after we get a pay rise. But did you know that the reverse is quite possible as well? In fact, living to a set budget can be quite empowering because, while anyone can do it, it does take discipline to achieve it – but the rewards are worth it.

Needing or wanting to cut back on expenses can happen for a lot of different reasons – from managing the rise in everyday expenses, to saving up for something big, contributing to your super or just building up a buffer to handle unexpected surprises. Whatever your motivation though, the basics are the same, and they’re straightforward.

How to enjoy life on a budget

The key to living comfortably on a budget is to combine realistic planning with self-control. And while many people find it a bit of a challenge to start with, it doesn’t take long before it just becomes routine.

Step 1: Look at your current spending. You can do this manually or use an app – some banks even offer these as part of their service to customers or you could check out the moneysmart budget planner.

Record every expense over the course of a few weeks and be prepared for a few alarming results. Just one takeaway coffee per day can add up to around $30 per week. That’s over $1,500 per year just on one daily coffee.

Step 2: Identify expenses. Divide all your expenses into two categories: ‘Necessities’ and ‘Luxuries’ and be realistic. One barista-made coffee each day may be a necessity for you, but maybe that extra  takeaway lunch or new pair of shoes is not. From the list of luxuries, work out what you can do without in the short and long-term.

Step 3: Set a manageable budget. Make sure you factor in any shared expenses and foreseeable price rises. Also keep a bit in reserve for unexpected costs. And there’s nothing at all wrong with putting a little bit aside as an end-of-month reward if you stick to your budget, and roll it into next month's if you don’t.

Step 4: Look for savings. If you haven’t been in touch with your utility companies, telcos, insurers, credit card providers, gyms and other subscriptions and membership providers in the last 12 months, now is the time to do it. A lot of these companies rely on customers rolling over from year to year and it’s quite possible that you’re paying more than you should Ie you’re getting the best deals.

If insurance, such as TPD, death or/and income protection is included in your super – as it is with Prime Super* - check to make sure you're not paying for multiple insurance covers, otherwise you could be paying  fees for something you don’t need.

*insurance cover is subject to eligibility

Step 5: Review your budget regularly. At the end of each month, check how you’re tracking. Have you overlooked some expenses you needed to cover – either personal or business? Did you come in under budget for the month? If so, that’s great. Can you make even more savings? Is it time to open a dedicated saver account with your bank – one that pays a higher interest rate or encourages saving? Did you go over budget? Was that because of unexpected costs or did you have a moment of weakness and how can you prevent that next month?

Step 6: Reward yourself. If you’ve stuck to your budget and you’ve allocated a little bit in your budget as a reward at the end of the month, then go on, treat yourself – you’ve earned it.

Don’t ignore the future.

If you managed to stay under budget for the month, consider tipping the surplus into your super, which may lead to more money in retirement savings. It’s your money, and even a little bit added in your 20s or 30s compounds over time and can make a big difference down the track. And while you’re looking at super, make sure you know where it all is, by doing a lost super search, and then consolidating it so you’re not paying multiple fees. You don’t want to be doing the hard work saving now, only to find your future income is being eaten away by extra fees.

Budgeting is not a dirty word.

For whatever reason you’re looking to save a bit of money, budgeting makes good sense. It’s up to you how much to cut back on, but every little bit makes a difference. And as long as you stick to it, you’ll be amazed at how easy it can be to cut back on spending while still enjoying life.

Need more info?

If you have questions about anything in this article, book a chat online with out super specialists.