Have you ever noticed that it doesn’t matter how much you earn, you always find a way to spend it?
Last year I realised that even though I was employed full-time, I was saving roughly the same amount each week that I was back when I worked a casual fast-food job.
Budgeting is a long-term commitment, with no short-term gain. It’s also just a case of a little forward planning and discipline for the greater good.
Around May 2017, I put my mind to saving with the goal of going to Europe at the end of the year, & I was amazed at how much I saved. In 4 months of saving, I managed to pay for my flights, accomodation, activities & travel insurance upfront AND save enough spending money for the trip!
How did I do it? By following these 13 practical steps that I could actually live by:
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- Set up a Savings Account: If you don’t already have one. Not the “spendings” everyday savings account that you already have, but an actual, interest earning account. There are so many different options, so go down to the bank & talk to someone. Tell them you want an account that will accrue interest & they can help you find a solution right for you.
- Download a bank statement: From the last 6 months & review all your purchases. All of them. Grab a couple coloured highlighters & colour code expenses that were necessary (rent, groceries, phone bill, internet, petrol etc.), pleasure items that you could cut down on, but you would miss them, and unnecessary items that you don’t even remember or could live fine without. Be honest with yourself & don’t negotiate.
- Write down all your expenses: Work out your weekly/fortnightly/monthly expenses depending on your pay cycle. This is the necessary stuff mentioned above – the expenses you have to pay to live & look after yourself.
- Find your disposable income: Calculate how much you will receive total (after tax) and dividing it up based on your pay cycle. If you get paid weekly, subtract your weekly expenses (step 3) from your weekly pay. What’s left over is your disposable income.
- Decide how much you need to save each week to reach your goal: You want to select a number that will go directly into your interest-earning account. This needs to be a figure that is big enough to achieve your financial goal, but low enough that you won’t have to keep taking money out of your savings account to pay bills.
*Note: if you have a credit card or loan debt, focus on paying this off before you start building your savings. Try not to move debts around from one card to another. It’s better to pay it off ASAP & move forward. - Use what’s leftover however you want: This includes dinners, weekend plans, snacks and anything else that requires money. Remember: you don’t have to spend it all every week. You can save it for next weekend, or your friend’s birthday coming up.
- Research the “interest free”, “pay later”, “too-good-to-be-true” offers before you sign: Read the fine print. Chances are your repayments could have double-figure interest with a penalty fee for early pay offs. Believe me when I say you CAN save enough without a credit card, and you should definitely try to.
- Try not to carry cash: Cash encourages random purchases & you often end up with spending amnesia.
- Use your savings for the important stuff: If an unexpected expense pops up, like your car breaks down or work’s gone quiet but you’ve still got bills to pay, take the money from your savings & don’t feel guilty – that’s what it’s there for!
- Buy groceries for the week: Meal prep is a pain in the ass, but it saves some serious time and money throughout the week. In 2017, I saved $1,078 in groceries by signing up to my supermarket loyalty program. Every few days I’d get an email about items that I’ve purchased before that were on sale. It became a habit to keep an eye on the sale emails & only buy sale items whenever I could. That $20 I saved each week added up!
- Look for ways to cut corners and save money: Ask for a re-evaluation on your gym membership if you’ve been there a while. Join a loyalty program, like Frequent Flyers to earn points when you shop (which you can redeem for cash) and fuel discounts. As well as saving $1k on groceries, I earned points through the same loyalty program that I used to buy a $400 smart watch!
- Keep a few fun things in your budget: You’ll stay on track longer if you allow yourself a few of your favourite things. If you love going out to dinner with friends on the weekends, make sure you eat at home throughout the week. Be flexible so you can still enjoy yourself. Just don’t go overboard.
- Be consistent: So you blew your budget last week for no reason. Hopefully you used your money on something that made you happy. Move on and do better this week.