Tips for planning a realistic personal budget in 2019
08 February 2019
For many, the start of a new year is a time for change.
Looking back on the year that's passed gives you the opportunity to take stock of what went well, what could have gone better, and new directions you may want to take.
If one of these new directions includes a more thorough approach to your finances, creating a realistic budget should be your top priority.
This article will tell you how to put together a comprehensive personal budget that you will actually stick to.
An effective budget gives you a good spring board for the new year ahead.
1. Establish what's coming in
The first step in planning your budget is working out your regular income, as well as what you already have in savings.
While you likely already know the answer to the first part of this, the second part will involve bringing together statements from a number of accounts, as well as your super. The aim here is to build a full picture of your financial assets, so leave no stone unturned.
2. Track your spending
It's always a good idea to keep an eye on your outgoings, but this is vital when it comes to creating a budget.
While many people can provide the headlines - rent, mortgage, phone bill, and their weekly food shop - there are lots of things that can slip through the crack. One-offs such as weekends away, or smaller routines like getting your daily caffeine fix are prime examples of seemingly minor expenses that can soon add up.
The benefits of gaining this holistic view of your spending are twofold:
- You can establish where all your hard earned cash goes: Remember that subscription you meant to cancel, or that gym membership from a city you left months ago? Tracking your spending helps you avoid wastage.
- You can find savings: By identifying these financial black holes, or other areas where you could cut back (thinking again about those cups of coffee?) you can make significant savings.
Create yourself some attainable savings goals based on your income and expenses.
3. Make some goals and priorities
Now that you have an overview of your income and spending you can start to design a personal budget for 2019.
A good way to begin this process is to flag the unavoidable expenses. These are similar to the kinds of things we've mentioned already, basics like the rent or your mortgage.
Once you've accounted for how much of your take home pay will go towards these items, you'll be able to see what's left to work with.
While it's up to you to decide the priorities to include in your budget, a good starting point is to pay off any debt you may have accrued. If left unwatched, debt from a credit card or loan will quickly gather interest, so getting in there early and making regular repayments will save you money in the long term.
Once you’ve got your payments sorted, you can look at your savings and investments, including growing your super to provide a comfortable retirement.
The most important factor, however, is being realistic with your financial objectives. Unachievable goals can be very demoralising and ultimately won’t get you anywhere.
4. How to include saving in your personal budget
For many, increasing the amount of money saved rather than spent is the primary objective when creating a budget.
Of course, if you reduce your spending while maintaining the same (and in time hopefully a better) income, then you will be able to save more efficiently. However, we have a suggestion for those who want to take this idea a little further.
As well as creating a designated savings account to hold the portion of your income that doesn't go on inescapable expenses, we suggest that you set up a second pot for those times when life happens. Even the best planned budget can be derailed by an unexpected bombshell like a vehicle breakdown or the damage caused by a burst pipe, so setting aside a little extra to draw on in these instances can lessen the financial blow to your primary savings efforts.
This means you can stay on track in building a nest egg to put towards landmark purchases such as a house deposit.
No matter what stage of life you're at, thinking about how you're going to support yourself during retirement should be incorporated in your savings regime. There are numerous options for boosting your super over and above the contributions made by your employer. To learn about the techniques best suited to you, it's always recommended to talk to a financial planner.
LGS has over 20 years' experience helping Australians successfully manage their money, and we'd love to help you too. To find out more, get in touch with our team today.
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