With the holiday season now behind us and 2024 well underway, now is an opportune time to reflect on your financial habits and make positive changes.
One crucial aspect of this process is reviewing your budget and finding ways to save money. Whether you’re looking to build an emergency fund, pay off debt, or invest for the future, here are some practical tips to help you review your budget and enhance your savings in the New Year.
1. Assess Your Current Financial Situation
Begin by taking stock of your current financial status. Analyse your income, expenses, and debt. Understanding where your money is going is the first step to making informed decisions about your budget. Consider using tools like budgeting apps or spreadsheets to organise your financial information.
2. Set Clear Financial Goals
Establishing specific, measurable, and realistic financial goals provides a roadmap for your budget review. Whether it’s saving for your next holiday, creating an emergency fund, or paying off credit card debt, having clear objectives will help you tailor your budget accordingly.
3. Track Your Spending
In order to effectively budget, you need to know where your money is actually going. Categorise your spending into essentials (like rent or mortgage, utilities, and groceries) and non-essentials (such as dinner in the Perth CBD, entertainment, and impulse purchases). Identify areas where you can eliminate, cut back or find more cost-effective alternatives.
4. Create a Realistic Budget
Once you have a clear picture of your income and expenses, create a realistic budget that aligns with your financial goals. Allocate a specific amount for each spending category, making sure to prioritise necessities while leaving room for savings and debt repayment.
5. Review and Negotiate Bills
Regularly review your recurring bills, such as insurance, utilities internet and phone. Explore opportunities to negotiate or switch to more affordable plans. Loyalty to service providers may not always be rewarded, so shop around for better deals and look into bundling services (such as your phone and internet) for additional savings or deals.
6. Automate Savings
Make saving a seamless part of your financial routine by setting up automatic transfers to your savings account. This ensures that a portion of your income is consistently allocated to your savings goals before you have the chance to spend it elsewhere.
7. Cut Unnecessary Expenses
Identify non-essential expenses that can be trimmed or eliminated. This might include subscription services, impulse purchases, or dining out excessively. Cutting back on these discretionary expenses can free up more money for savings.
8. Prioritise Debt Repayment
If you have outstanding debts, prioritise a plan for repayment. Consider the snowball or avalanche method, focusing on one debt at a time or tackling high-interest debts first. Redirect the money saved from eliminated debts towards your savings goals.
9. Build an Emergency Fund
Establishing an emergency fund is crucial for financial security. The amount you need in your emergency fund will vary however a common piece of advice is to aim for three to six months’ worth of living expenses in a liquid account. This fund acts as a financial safety net, providing peace of mind in the face of unexpected expenses or job changes.
10. Review and Adjust
Arguably the most important step in your budget is to review regularly. Your financial situation and goals may evolve throughout the year. Regularly revisiting and adjusting your budget ensures it remains aligned with your current priorities and circumstances.
As you review your budget and saving plan for the New Year, remember that small changes can lead to significant financial improvements over time. By adopting these practical tips and committing to sound financial practices, you’ll not only enhance your savings but also pave the way for a more secure financial future. If you are looking for a place to get started, Armada have put together a simple budgeting template for you to use. Alternatively, you can contact our Financial Planning team for in-depth and personalised assistance.