Income rich, cash poor? Top 4 tips for managing your money
Looking to take control of your money, but don’t know where to start?
Money management isn’t always the most exciting topic, but get it right and you can not only save yourself a lot of stress, but enjoy more freedom in spending your money on the things you really want – whether that’s travel, buying a home, or a few luxuries now and again.
The good news is there’s no secret formula to managing your money. You simply need to put some time into understanding your financial situation in order to set up some good habits.
Follow these tips to get started:
Do the maths
Do you know how much you’re really taking home every payday? Your first “real” job may not deposit as much into the bank as you first thought, especially after taking into consideration tax, super and that daily caffeine fix.
Always take time to make sure you understand exactly how much you’ll be paid, and how often. Then, when your first payday rolls around, study your payslip to confirm exactly how much is landing in your bank account - your “take home pay”.
Make a budget
OK, you might be yawning, but at the heart of any good savings plan lies a budget. Budgeting helps you to find a balance between spending and saving so you can make sure you always have cash for the important things (and some fun things too!).
Start by understanding where your income is going. Check your bank statements, bills, and receipts to work out all your regular expenses, such as your rent, transport, insurance, utilities, mobile phone, and Netflix.
Deduct these expenses from your income, then take a good look at the number that’s left behind.
Are you spending more than you earn? Do you want to save more each month? Have a good think about what’s truly essential, and which things you could do without. Be ruthless – maybe you don’t really need sushi for lunch every day, or you could cut down on your streaming subscriptions?
If you like to take a systematic approach to budgeting or you’re feeling a bit lost, try the 50-20-30 rule. It goes like this:
50% of your income is for essentials such as rent, food, utilities and transport. You know, all the boring stuff.
20% towards savings or paying off debts.
30% for fun things like a night out, entertainment, subscriptions.
Build your savings pot
We all want to save more, no matter what job we have or what life stage we’re at. But wanting to save is one thing…actually doing it? Well, that takes a bit of work.
The first step is to set up a savings account. Savings accounts can give you a higher interest rate than an everyday transaction account, and often come with restricted access. Over time - they’ll fill up faster!!
Next, get into the habit of putting a set percentage of your earnings aside into your savings account. Everyone’s budget is different, but aim for around 10-15% of your take home income if you can.
A top trick is to set up an automatic transfer into a savings account every time your salary hits your bank account. That way you never miss it.
Another way to build your savings is to round down your transaction account balance every time you check it, and transfer the leftover amount to your savings.
For example, if you log in and see your account has $208.70, you can round it down to $200 by transferring the $8.70 to my savings account.
You won’t miss the small amounts - consider them your ‘sneaky savers’ - a bit extra in your savings account each month.
Use the free tools
Let’s face it, keeping tabs of your spending can be tedious. But there are some great budget planners, online calculators and apps to make it easier to stay on track.
Most banks have free budget planners and calculators. Your online banking app may even automatically categorise your daily spend to ensure you can see exactly where your money is going. Poke around and explore the free functions on offer!
More broadly, try a few different online tools to find the one that works best for you. To help you get started, try these free tools:
Bottom Line
Money provides choices. The better you manage it, the more choices you’ll have. Start by truly knowing your financial situation, set out some goals, and use a bunch of free tools to make budgeting and saving easier. Put in the time now, and you’ll be laughing your way to the Amalfi Coast in no time!
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