Capable: fine-tuning your budget

30 Sep 2019 3 min read

Becoming financially fit, just like maintaining your fitness routine, requires discipline. And for those on the path to financial freedom, one of the key tools for success is your budget. In this instalment of ‘Fierce Females’ we take a closer look at ways you can manage your money to help you achieve your financial goals.

When it comes to setting a budget, honesty really is the best policy. It’s too easy to conveniently ‘forget’ about some of our spending (hello eating out, after work drinks and online shopping) to make ourselves feel better and pretend that we’ll be able to save a lot more than we really can.

For NGS Super Financial Planner Trudy Jenkins¹, it’s crucial to have an honest understanding of how much you are spending on a regular basis.

“You need to have absolute clarity on your regular spending habits and how much income you have coming in to cover that,” Jenkins said. “If you then find that you’ve got no capacity to save, then you need to make some changes, which means trimming some of your expenses. It might seem boring at the time, but key to getting ahead.” Here are some tips for making the most of your money, including a couple that allow you to get someone else to do the hard work for you!

You really do need to know exactly what you are spending each month, including all the little expenses we often forget. Don’t just jot down hazy estimates of what you spend – for a couple of weeks or even a whole month, write down (on your phone is easy) every single cent, whether it’s your train fare to work, that pair of shoes that you actually do need, or the gift for your best friend’s birthday. Obviously not every month is going to look the same, but it will give you a good idea.

Know what you’re saving for

When you’re setting your budget, keep both long and short-term goals in mind. For example, your long-term goal might be a house deposit, but a short-term goal could be to increase your savings account by a certain amount in the next six months. When you set some small, more easily achievable goals, being able to tick them off as you reach them can really help you to maintain motivation for reaching the larger, longer-term ones.

Stay on track

If you’re sick and miss a workout, you know that you just have to deal with it, and get back to the gym when you’re feeling better – you don’t quit forever. In the same way, if you have a budget blowout, whether it’s an unexpected expense you couldn’t have predicted, or a moment of indulgence, don’t see it as a sign to throw in the towel. Maybe note that you need a buffer, or think about why you splurged, then get back to it.

Check in on your budget

You know that if you keep doing the same exercises, your body eventually gets accustomed to them, and you need to mix it up to maximise your fitness. Well, while you don’t need to mix up your budget for the sake of it, it’s likewise not set in stone. If it’s not working for you, take a look at why – and change it.

Salary sacrifice to super

We’ve mentioned the power of compounding before, but it bears repeating. With just one email to your HR or payroll, you can ask for extra money from your salary to go into your super. Even if it’s a small amount, like $20 or $50 a week, this contribution can have a significant impact over time.

The other great thing about salary sacrifice is that this money comes from your pre-tax income, so the dent in your take-home pay will actually be less than the amount you’re contributing. Let’s say you earn $80,000 a year and are paid fortnightly. Your PAYG tax is $694, so your take-home pay is $2382. If you decide to salary sacrifice $100 a fortnight, your PAYG comes down to $660 so your take-home pay is $2316 – that’s only $66 less, with an extra $100 going into your super.

Investigate a ‘round-up’ app

Another way to save with a less rigid budget is to use a round-up app (just search on your relevant store). They’re kind of a smarter way to save your loose change now that most of our transactions are electronic – they round up your everyday purchases and put the ‘change’ into a portfolio that invests in a wide variety of stocks via exchange-traded funds (ETFs). You can choose round-up amounts and limits, and build yourself a portfolio without even thinking about it.

For advice on becoming financially fit, visit our advice services page here.

¹ Trudy Jenkins is employed by NGS Super Pty Ltd and is also an Authorised Representative (1234906) of Guideway Financial Services Pty Ltd (“Guideway”) ABN 46 156 498 538, AFSL 420 367 and provides advice under the Guideway AFSL.