Why we spend money we don't have
On the surface, saving money is simple - spend less than you earn, right? If only. Reality for most of us can be quite different with anything from unexpected bills to loss of income to plain old uncontrolled spending standing in the way. If you’re struggling to save, the best way to give yourself every chance of success is to create a budget. If budgeting sounds overwhelming, follow these five steps and you’ll be well on your way to saving money quickly.
Step 1: List your monthly income
A budget needn’t be a burden, and often the thought of drawing one up is worse than the actual process, so let’s start with the easy bit.
The first thing to do is sit down with a pen and paper (or tablet and spreadsheet) and simply list your monthly income.
Tip: Use internet banking for this as it makes filtering the month’s income simpler and you’ll soon have a figure to put in your income column.
Step 2: List your monthly costs
This step will take slightly longer since money tends to go out in many different directions. Start with the big stuff and work your way down.
- Rent/home loan
- Other loans/hire purchases/credit cards
It helps to break them down into two classes - fixed and variable.
Fixed items will be big ticket things such as rent, mortgage, hire purchases and power. Again, internet banking is a great way to quickly find these costs to add them to the outgoing column of the budget.
Variable costs can be tricky -- they’re often small and seemingly insignificant, but when added up suddenly seem much larger. Use internet banking, credit card statements, even go through the receipts stuffed into a wallet or glovebox. Be thorough here and list every little thing you can think of.
Tip: Use a smartphone to set up a simple list (or use a suitable app) to record daily expenses for the coming month if you’re having trouble creating a complete list.
Step 3: Don’t forget the big stuff
Large annual expenses such as rates, car registration and insurances can be easily overlooked. They’re also the ones that can throw a tight budget into disarray. Prepare for them by breaking the annual cost down into 12 portions then add them to the monthly budget, setting money aside to cover them.
Tip: When setting money aside, it can be tempting to use it for other things. Put it in a separate account, preferably one that has no access via EFTPOS.
Step 4: Prioritise the outgoings
Once satisfied that your list of monthly outgoings is complete, it’s time to prioritise the essentials from the ‘nice-to-haves’.
At this point, the budget will either be in surplus or deficit. If yours is showing a deficit, now’s the time to make the tough decisions regarding expenses. Be honest with yourself -- discipline will be required to make the necessary cuts.
Tip: Write it all down. Often just seeing the list of expenses is enough to motivate a budgeter to chop out the luxuries.
Step 5: Stay on top of it
With all the hard work done, it’s important to stay on top of the budget and not slip back into old habits. Regularly reassess the income and expense columns in your budget. If income goes up, ensure that cash goes to good use (pay down debt, for example) rather than just being soaked up by an extra coffee or two.
Tip: Hunt down avoidable costs. Bank fees are a good example - we go over a range of tips to help avoid unnecessary banking costs in this article. Also make sure due dates line up with payday, most utility companies offer discounts for prompt payment and are happy to move a billing cycle to accommodate your payday.
Start out on the right foot
BNZ can help you reach your savings goals faster. We have a range of options to match your style of saving and help make it easier for you to reach your goals.
Consider your savings style, as well as rates and fees, to find the savings account that fits you best.