The two things every financial plan needs are goals and a budget. Super unsexy we know, but before you switch off, hear us out.
To get ahead financially so you can live your dreams, you need to be generating a cash flow surplus each week. In simple terms, spend less than you earn. The bigger the gap is between spending and earning, the more you can save and invest for the big stuff that really matters. This is where a budget comes in.
If you don’t tell your money where to go, you’ll wonder where it went.
Budgeting can be tricky (and a little tedious, and a little painful), but budgeting gives you some accountability for what you’re spending, helps you create a cash surplus and channels that surplus to the real goals.
Yeah, you might have to cut your coffee shop visits from daily to every second day, you might have to stay in a couple nights this month and have a few less outfits but if that brings your trip to Europe, first home or investment property closer, you’ll make the small sacrifices.
A good budget allows you to enjoy life now (so don’t cut out all the fun), while also accumulating wealth for the future that can fund the big stuff, the big dreams – the globetrotting, the investment property, the dream wedding. The point of your budget isn’t to stop spending; it’s to channel your spending in the right direction.
Set goals – it’s hard to make even the smallest sacrifices if we don’t have our eyes on the prize.
Don’t cut all the fun – a budget should be like a good diet, well balanced. There’s no point cutting out all the fun, to then go splurge on a big ticket item.
The internet – there’s lot of budgeting widgets and excel spreadsheets out there. Our favourite is the MoneySmart Budget Planner. Quick, comprehensive, easy to use.
There’s an app for that – once we’ve got a budget we use an app called Pocketbook to keep track of it. It’s a great, transaction tracking app that’s easy to set up and will categorise each transaction and report your spending back to you.