Without an intimate understanding of how our money is being spent, we are left living pay cheque to pay cheque. We end up being controlled by our finances, which impacts our ability to achieve the various goals we have in life, such as buying a property or going on an overseas holiday.
According to Mortgage Choice’s Australian Financial Savviness whitepaper, 94% of Australians believe their money should be working for them. You can take control of your finances by better managing your cashflow and tracking where your money is going.
A monthly budget
A good starting point is to draw up a monthly budget. You should begin by finding out how much money you have coming in, such as your salary, your partner’s salary, income from shares and investments, and any benefits.
This will help you know exactly how much you have to work with each month.
List it out
Next, you should make a list of your expenses including regular payments such as credit card repayments, mortgage repayments, groceries, insurance and utility bills. Don’t forget about other costs such as entertainment and hobbies – these may not be the same each month so use a ballpark figure.
You should add the total amount of your expenses and compare it with your earnings, and you will get a clear picture of your spending habits. You may find that you have money left over after each pay cycle so rather than leaving it idle, you could put it in a high-interest savings account.
On the other hand, you may discover that there are certain areas that you could potentially cut back on, such as unused gym memberships and subscription costs.
Take the opportunity to shop around for better deals as this will result in more savings for you. If you have a home loan, consider refinancing to a lender with a sharper rate. If you have insurance, make sure you are paying for what you need or switch to a more affordable alternative.
By knowing where your money is going each month, you will be able to plan ahead for expenses, save more, and not feel guilty about that expensive dinner.
Talk to an expert
Staying on track can be tricky, but at FinChoice, we provide cashflow coaching to guide you on your financial journey. Our expert advisers will work with you to set your goals and come up with a tailor-made plan to achieve them.