With the middle of the year almost upon us (and the end of the year for those following the financial calendar), now is a great time to review your budget and look for areas of improvement. Reviewing and setting out a budget can feel overwhelming, especially if it means breaking spending habits you’ve had for long time. When it comes to reviewing your budget yourself it helps to keep it simple. We’ve put together a step by step guide to help you review your budget from home. These steps can be followed whether you have an existing budget or not.
Thinking about your financial goals is a great way to start the budgeting process. Cutting out spending can be hard, so visualising what you’re working towards can be an effective way to stay on track when it comes to budget. Whether you’re wanting to buy a home, a car, pay for school fees, or you’re looking to reduce stress, your goals will help drive the success of your budget and will be a good point of reference to look to when you’re feeling unmotivated.
If you already have financial goals in place are they still relevant? Financial goals do not have to be set in stone, they can move with you as your situation and priorities change.
If you have been tracking your spending take a look back at where your money has gone. This will help you to look at what is being spent on necessities (such as fuel and utility bills) and what is being spent on things that are just nice to have (such as meals out and takeaway coffee). If you haven’t tracked your spending now is a good time to start, that way you’ll have a better idea on where your money is going when you go to review your budget again in the future. If you haven’t been consciously tracking your spending you might be able to pick up on your spending habits by looking back at credit or debit card statements.
Can you cut back on spending in certain areas, such as the grocery bill, or can you look at stopping spending completely on certain things, such as buying bottled water while out? Once you have tracked your spending and written it down it will be a lot easier to find areas for saving. If you can cut back on your weekly grocery bill by $20, that’s a saving of just over $1,000 in a year – potentially enough to take a long weekend away, or to help pay off or offset against your mortgage.
Think about how small changes might add up to make a big difference. For example, the $20 saved at the supermarket checkout might be from cutting out magazines, switching muesli brands, and avoiding the chip and chocolate isle. If you’re not convinced, give it a go and see how you feel after a month. Remember to track your spending.
Next step would be to set out a budget – how much money is coming in each month and how much is going out? There’ll be a certain amount of money that has to go out for things such as rent, loan repayments, school fees, and fuel. However, as you will have discovered in the previous step, there may be certain amounts of money going out that can be reduced or totally stopped. Setting out a budget will help you get a clearer picture of just how much you can save by spending a little less or completely sacrificing unnecessary expenses.
Once you have drawn up a budget you’ll have to work at sticking to it. Sticking to a budget can be hard work, especially if you spend money out of habit. Here’s some simple tips to help you stick to your budget:
Remember, things don’t stop here, it’s important to review your budget to ensure it’s working for you and to ensure you are working towards your savings goals.
Budgeting isn’t easy so it’s important to give yourself a pat on the back for your budgeting achievements. Not only will this make you feel good it will also help to keep you on track with your spending.