Step 1: Figure out how much you actually earn in your hand
We all know how much we are on, but once you take out tax and superannuation, the end figure can look quite different to what you might have thought. You may also need to consider other sources of income like interest on savings or selling old items on ebay.
Step 2: Collect all your financial In and Outgoings
Find and print out your latest banking and financial statements as well as recent bills, invoices and receipts. It may take a while to find everything but its better having the actual figure in front of you rather than estimating costs.
Step 3: Add it all up
Now it’s time to see what you actually end up with each month. Subtract the average amount you spend from your income in hand. This is the number that you’re hoping to improve so if it’s a bit less than you thought don’t worry – it’s only going to get better.
Step 4: See where you can start cutting back
This is the not so fun part. Break down your expenses into fixed and variable. Fixed are those such as mortgage or rent payments which are the same each week and can not be altered, whereas variable may be things like groceries and clothes.
From the variable list, consider areas where you could cut back – even just cutting back on that extra glass of wine can add up over a year. You need your budget to be achievable and you still want to be able to enjoy yourself so don’t be too harsh or set un achievable goals.
Step 5: Set yourself some saving goals
Look at your list of variable expenses, underneath each item set yourself an achievable goal on how much you think you should spend on that particular item. Do this for each item on your variables list. If you add up the savings you’ll make with these new goals, you can estimate how much you will be able to save given your total in hand income.
Step 6: Make a plan
Now that you have an idea of how much you can realistically save each month, create yourself a savings plan. What is the overall goal you would like to achieve and how long is it going to take you? Use this Savings Calculator and you can work out how long it will take you to reach your goal with your estimated savings.
Step 7: Make sure you track your progress
Once you’ve started on your savings plan, monitor how well you’re tracking against the budget you previously set. Look at how close your spending is to your estimates. If the figures aren’t going the way you’d hoped – don’t be too disappointed – factors change, life changes and budgets can take a bit of trial and error. Revise your budget and change areas and or amounts where you had cut back so it’s more realistic and achievable.
Once you’ve got your savings under control – give Chris a call on 0434 449 455
and he’ll show you how to invest it!!