Budgeting, saving and spending may sound very basic, yet prove difficult for many to incorporate into their personal financial situation…..if at all. 

As 2017 draws to a close and we reflect on the year we’ve had whilst anticipating the year ahead, we should consider some steps to ensure we are on the right track to building our personal wealth.

A Plan of Attack
Increasing your wealth is really no different to planning a holiday – you need to know where you are starting from, where you are going and plan the best way to get there.

The easiest way to start is to audit your current finances and track your spending.  Consider taking advantage of one of the helpful calculators available online to find out your current worth and help you manage your finances (1).

Determine and document where you want to go and establish your short, medium and long-term goals, taking into account your age and personal circumstances.  Are you saving for your first home?  Do you need to think about your children’s education costs?  Can you contribute more to your superannuation for your longer term retirement planning?

Use these goals to start to draw your roadmap with a plan to guide you.

The budget!
In order to reach your goals and provide you with more money to save or invest – the solution never changes.  You need to live within your means and avoid unnecessary debt.

This means learning to how to budget and understanding how you are spending your money, not spending unnecessarily or more than you can afford.  It’s a good idea to regularly check your expenses and bank statements to see where your money is going and where you may be able to save on expenses.

To build your budget, start with comparing over a 3-month period of how much money is received (all your post-income) versus your total expenses.

Once you’ve worked this out, create your budget or a plan on how you will spend in the future.  And stick to it!

Remember, Be Smart with Costs
When creating your budget, it also helps to work out ways to reduce your costs and unnecessary spending.  Starting the new year is always a good time to review your expenses and check whether you can negotiate a better deal especially for your regular bills eg. utilities, car registration or insurances.

Take into account:

• Are there any regular payments you could cancel or switch and update – your gym membership or pay TV, mobile phone plan?
• Are there any cuts you can make that won’t make affect your lifestyle too much – BYO instead of ordering wine in restaurants or bringing your lunch to work a few times a week instead of buying every day?
• Could you shop and manage more efficiently for your weekly basics like food, clothing, groceries and transport – buying in bulk, shopping online, waiting for the sales to start and limiting impulse purchases?
• Efficiencies with your utilities – how energy and water efficient is your home and what could you do to improve on this?

It’s a Discipline
Saving what’s ‘left over’ each month will help you achieve your goals faster, however this does require a disciplined approach.  Instead try to schedule a regular payment into a savings account as soon as you have been paid.  Build on this, then use these funds to open a term deposit or other fixed interest investment that you are unable to access so that you are not tempted to spend any available money.

Remember your goals and what you are saving for could help you stay motivated!  And force you to take time to consider a purchase using these funds, rather than buying on impulse.

Managing Your Debts
When you consider your debts, especially credit cards, remember that if you continue to make minimum repayments, you will get deeper into debt.

Update your budget to include regular, fixed payments that will help you from losing control of the debts.  Paying off the debts faster by including additional payments or paying more frequently will also help you eliminate them faster.  Alternatively, speak with your financial institution to consolidate them into a single loan that has a lower interest rate and set repayment schedule.

Take Charge of your Money
Using these simple steps can help you take control of the money in your wallet, instead of feeling that it’s controlling you.  Taking some time to set your personal goals, creating a plan to guide you and organising your budget are key to taking ownership of your financial future and growing your personal wealth in 2018.

(1) https://www.moneysmart.gov.au/managing-your-money/budgeting

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