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With 86% of Australians saying they don’t know what they spent last month, it’s fair to say we aren’t great budgeters.i But in many cases, the problem isn’t writing a budget per se so much as it is sticking to it over the long term. The good news is with a few simple tricks you could change your spending habits for good and start realising your dreams sooner.
Many budgets get derailed because they simply aim to achieve too much. If your goals are too lofty, your budget is much more likely to fail and you may give up on budgeting all together. Aim instead to set achievable goals that have incremental rewards. This way you’re more likely to stay on track.
You also want to be real about what you can live without. Think deeply about what gives you true pleasure on a day-to-day level. Maybe you need that morning latte because it’s an important part of your daily ritual. Those impromptu online purchases made from your i-pad at 2am on the other hand might need to go.
When going about making your budget, ensure that you are being honest about your expenses. Budgeting does not simply mean tallying the costs of the rent and monthly bills. You have to incorporate every single thing you spend money on, including the costs that don’t come around too regularly (like visits to the doctor or car registration). In this respect, some months your outlay may be a lot higher than others – heating a cold old house in winter can make your energy bills skyrocket. The trick to good budgeting therefore is to be as detailed as possible as to when certain costs come around and have both a long and short-term view. This means breaking your annual income into twelve months then borrowing money from low overhead months and putting it into high over-head months to stop you from dipping into your savings.
It’s not enough to write a budget at the start of the year, put it in a drawer and hope all goes to plan. Budgets that stick, need to be stuck to. Set aside one night a month to review how you’re going. You’re not going to get it right the first time. But you might just find after a few months the difference between your predicted costs and actual costs shrinks.
Another good habit to get into is regularly checking your bank account. Leaving it too long between glances can make it a scary thing to do. And though there is truth to the saying ‘ignorance is bliss’, the bliss will most definitely wear off when your card declines and you have to dip into your savings. Reviewing your account regularly will help keep your spending in check.
Now that you’ve got the hang of checking your banking app regularly, you may want to delve deeper into the world of tech to help your budget stick. Your bank probably already has an online portal that portions your monthly spending into neat categories like ‘rent’ and ‘eating out’. But there are also budgeting specific alternatives online which might liven up the notoriously tedious and time-consuming task of budgeting. Apps like Mint, Mvelopes and YNAB (You need a budget) make it a breeze and, dare I say it, kind of fun.
Sometimes life doesn’t go to plan. That much is a given. So, it’s important to have some money set aside for those little emergencies. Say your washing machine breaks or you need to get interstate to visit a sick relative. Events like these needn’t undo all your hard work. In addition to having your regular long-term savings account, set up a different one that you make regular contributions towards for rainy days.
The reason you’ve made a budget is so you can start reaching your goals sooner. And, with the help of modern technology, plus a little discipline, sticking to your budget is easier than ever.
If you’re still having trouble, you might just need someone to talk to. Come have a chat with us about your dreams. We can help you make a plan to reach them.