Becoming a better budgeter can help you save more, invest more and get ahead on your home loan.
To stay on top of your finances, there are two broad approaches you can take.
The first is to plan how much you’ll spend on each category (groceries, entertainment, etc) each month. If you stick to your budget, you’ll know in advance how much you’ll save.
The second approach is to throw out the budget and focus on saving instead:
- Decide how much money you want to save each month
- Set up an auto-transfer to move this amount of money from a transaction account to a savings account whenever your salary gets paid
- Spend whatever is left in the transaction account, however and whenever you like
The first approach suits people who want to pay close attention to their money, while the second is for people who want to ‘set and forget’ their savings.
Whichever approach you take, a good place to begin is to review your last 12 months of expenses, to see how much you’re spending and on what things. You can use that information to identify areas of wastage and set savings targets.
