I thought I would never be able to travel and that I was "lucky" to be paying off my mortgage and not renting. I also thought that having an investment property was way out of reach for me.
If anyone said to me “just put a bit extra away each week” I would laugh because I didn’t have anything spare to put away for anything. No money for saving – just able to scrape through each fortnight from one pay day to the next.
By doing a proper budget (including tracking the small stuff) I cut down on some of my unnecessary spending – magazines, buying lunch each day, junk food and “extras” while food shopping and had a spare $50.00 each fortnight.
I combined my credit cards to have only the one – increasing one limit to pay out the other and then cutting both up straight away and closing down the extra account. I still had the same limit but only had to concentrate on one repayment amount each month and one lot of interest. (Please note that it is vital that you shut down the other account immediately otherwise you will find that you will use it again and have bigger repayment problems.)
With the extra $50.00 I now had each fortnight I would transfer that money straight on to the remaining credit card in addition to the minimum monthly amount. As soon as I got my tax refund back I transferred that money also into my credit card account. I was able to reduce it quite a bit and then straight away reduced the credit card limit down to a much lower limit. If I got any overtime or holiday loading that also went on the credit card until it was finally paid off.
I was then able to pay some extra of my mortgage each fortnight. By paying all my bills each fortnight – advising each provider or setting it up with my bank I now have all my bills covered.
I don’t have to worry about the bills coming in and I am not focusing on “not having enough”. In the last few years I have been able to go on holidays to Bali, Phuket, Melbourne and Queensland and have gone halves in an investment property.
As I am paying extra on my mortgage, this will also reduce the amount of interest payable and the amount of repayments
Some simple tips to help:
Number 1 - Tracking
The first step is to start tracking what your money is being spent on. It is amazing how quickly the little things add up that we are not even aware of.
Try and do this for at least a few months especially if you have a household to run.
Number 2 - Goal or Reward
Set yourself a goal of what you want to save up for and how much money can be put away each week. It is best to allocate some money for saving first – this is one thing that the rich people do (pay themselves first).
It is important to have goals that are simple, specific and achievable. Some people use the term SMART goals.
S - Specific
M - Measurable
A - Achievable
R - Reasonable
T - Timeframe
If it is a long term goal like saving for a deposit on a house, split into smaller chunks to make more manageable and that can be achieved in a shorter time frame. This will ultimately be the stepping stone for your long term goal.
You will always otherwise spend what you earn and never be able to save and get in front. Arrange with your bank to have another account specifically for savings – either a long term or higher earning interest account and have this amount transferred each pay period.
By having a goal this will give you the incentive to stay on track and be focused on your budget. Also if this money is removed from your everyday account you are less likely to spend it.
Number 3 - Budgeting (this one is the big one)
Work out what expenses or bills need to be paid and take the total expenses (and savings) away from your income. Include the little things or miscellaneous items that were in your tracking sheet.
You may either have to increase your income or reduce your spending or you may find that you “blow the budget”.
It is ideal if you can get an overall idea of what your expenses would be for the
whole year as this then includes “big ticket” items such as land and water rates, registration, insurances, water usage, gas, power, back to school
supplies such as uniforms, books and stationery and emergencies.
For all of these allocate a weekly or fortnightly amount and if possible
have it direct debited or make arrangements through your bank to transfer the
money by BPay straight to that provider or have transferred into a separate
Try to allow for extra to pay off your credit cards, loans and mortgage and organise for fortnightly payments instead of monthly. Even if it is only an extra $20.00 a fortnight it will dramatically start to reduce the interest that is required to be paid back.
Change your insurance payments to fortnightly and if you own or are paying off your house, organise to also pay the land and water rates each fortnight or
Although these only come in once a year and give you the option to pay in full or by four instalments they will let you make arrangements to have it direct debited or paid by BPay each pay fortnight or month. You can also include the water usage that comes out twice a year onto your repayment
Include also an amount to be spent on Christmas presents and Christmas in general. You can get some great bargains throughout the year which you can use the allocated amount to put them on laybys. You can also get some great hampers through Crisco and other companies that let you pay them off over the year – including toys and entertainment then delivering to you a week or two before Christmas. Some places of employment will actually deduct a specified amount each fortnight through their finance department and give you a cheque back around Christmas time to help reduce the stress and worry.
Another idea is to pay a little extra in tax each fortnight. This would mean that by the end of the financial year your refund would be much higher and enable you to either reduce your debts even more – mortgage, credit cards etc or be a reward and pay for the family holiday instead of using a credit card.
Have the allocated amount for each of your bills paid automatically each fortnight or month. It straight away reduces the focus on “lack of money” as you are not continually stressing when the bills come in. You will even find that you will start getting the bills with no money owing – nil balance or that you are in credit –which is a fantastic feeling.
Prosperity & Self Esteem Coach