How does it work?
Having a budget helps you to feel in control of your money. You can put aside money for big bills when they arrive, and plan savings to achieve your financial goals.
There are many free tools and apps that can help you calculate your budget. You can then set up your bank accounts to help you maintain it.
- Set your financial goals. Do you have a savings goal? Buy a house? Retire at 50? What motivates you to get control of your money and start saving?
- Track your spending. Having a clear picture of your regular expenses and spending habits will help you set up your budget. To do this, track your spending over a week, a fortnight or a month.
- How to set up your budget. Use how often you get paid as the timeframe for your budget. For example, if you get paid weekly, set up a weekly budget.
Understanding how you spend money and then what you can or cannot control, is key to setting yourself up for savings success! Once you know what you can save, you can have this money automatically allocated to a separate savings account – you won’t even notice it’s gone… A tried and tested method is three bank accounts set up as follows:
- Bank Account 1 for everyday spending.
- Bank Account 2 for big lumpy bills.
- Bank Account 3 for savings.
It's important to adjust your budget as things change. For example, if you find you can't cover all your expenses, savings and spending, you may have to reduce your spending limit, or change your savings goal. Tracking your spending will help to keep you on budget and identify any changes or issues with your budget early, so you can address them and keep on saving. Being accountable to yourself is important with money too.
What are the benefits?
- You are more likely to meet your savings goals if you actively track your expenses and your progress.
- Smoothing out bill payments by making small contributions often, can ease the financial stress of paying big bills and avoid dipping into your savings account.
- Having control over your income and expenses will give you peace of mind.
What should I be thinking about?
- Keeping to a budget requires discipline. You need to be consistent in applying your budget on a daily, weekly, monthly basis.
- Your budget needs to be based on real numbers, otherwise it may be unrealistic and difficult to follow. Make sure you track the accuracy of your budget regularly.
- Sometimes you have to budget for less money for discretionary spending so that you can cater for your longer-term needs and goals.
- You will have unexpected expenses from time to time. This is where your cash savings will assist you as needed.