Young Australians (those aged less than 30 years old) save less than any other age group, including baby boomers and those nearing retirement, according to the Reserve Bank. To help you be the exception, we’ve outlined 6 easy steps to help you write a budget and start saving today.
1. Set realistic goals
If you don’t have a goal you’ll struggle to motivate yourself to achieve something substantial. So the first thing you need to do is understand why you’re saving money – whether it’s for a car, a holiday or your first home.
Decide on the date by which you’ll aim to achieve your goal, and calculate how much it’ll cost. Then work out how much you need to save per month to make it happen.
Write the name of your goal down and put it somewhere you’ll see often. This will constantly remind you why you’re budgeting to help you stay motivated.
2. Understand your spending
Take a good hard look at the transactions on your online banking and credit card accounts over a month. Calculate your total spending and compare it to your income – are you spending more than you earn? If so, you need to trim the fat.
Divide your expenses into categories like social, utilities, food, transport, accommodation and travel, so you can understand where your money’s disappearing to.
3. Separate needs and wants
One of the most important lessons that budgeting will teach you is the difference between essential and non-essential spending. You can’t live without the essential stuff like food, power, transport and medical, but you’d probably be ok if you missed the non-essentials like wines after work, new shoes and trips to the movies.
4. Use the 50/30/20 method
Aim to spend 50 per cent of your after-tax income on the essentials, 30 per cent on fun and non-essentials and put 20 per cent into an online savings account. This framework will help you to identify if you’re spending too much, and give you structure to work around.
5. Automate it
Make your budget as easy as possible to stick to by automating it. Use online banking to set up an automatic payment of 20 per cent of your income into a savings account on pay day. You could also use different transaction accounts with separately linked cards to make sure you stick to the 50/30/20 split.
6. Keep an eye on your progress
Budgets are made to be broken every now and then. Whether your car breaks down or an unexpected expense arises – these costs happen. Don’t despair when you have a blow out. Instead keep an eye on your progress and keep trying to trim unnecessary spending where possible.
If you’re ready to write a budget and start putting money aside, drop into your local BOQ branch to set up a savings account today.