Short guide to budgeting

When it comes to our finances many of us are creatures of habit; some habits are good, some bad. Our spending habits are usually based on how much we get paid, and how frequently we get paid.

So when we change jobs, or when the timing or frequency of our regular salary payments change, you may need to adjust the way you manage your money to ensure you don’t overspend and leave yourself short of cash towards the end of the pay cycle.

In fact, these changes are a great opportunity to sit down and take a good look at your spending habits and see if there some easy ways you can put a little more away for something big like a new car, a home deposit or even your retirement.

People who achieve their financial goals are usually people who have learnt to stick to a budget which is essentially a plan to spend less than you earn.

Getting started is simple. The first two things you need to do is to track your spending and create a budget.

Track your spending

Tracking your spending helps you understand your daily money habits. You can do this by:

• Checking your bank statements. Look at the amounts of money coming into your bank account and the amounts going out
• Keeping a spending diary. Make a note of everything you spend for one pay or a specific period, i.e. at least a week. This will only take a few minutes a day.
• Identifying spending leaks or opportunities to save. Spending leaks are those small regular purchases, like a morning cup of coffee, that add up over a period of time. If you're trying to save some extra cash, think about your spending leaks.

Creating a budget

Sticking to a budget helps you get off the treadmill of living from one pay packet or payment to the next. It enables you to sort out your financial priorities and find the right balance between spending and saving.

A budget can also help you pay off a credit card or loan, plan better for when your bills are due, and save up for a holiday or a big purchase.

There are a number of steps to putting together a budget:

1. Use a budget planning tool such as the following from Local Government Super: https://www.lgsuper.com.au/assets/factsheets/YourBudgetPlanner.pdf
2. Set aside some time and make sure there will be no distractions. Make sure you have all the information you need about your income and spending such as pay slips, bank statements, credit card statements etc
3. Start the Budget Planner by listing all net income that you receive
4. Next use the information from tracking your spending to record your expenses
5. Subtract your total income from your total expenses. You can now see exactly how much money you have, or don’t have, to spare.

Saving tips

Reduce luxuries: Set a monthly budget for luxuries and stick to it.

Minimise debt: Cut up all but one of your credit cards. You can’t save if you have them and most of us can’t afford to keep them. For emergencies, keep one card, preferably with an interest free period. Make sure you reduce the debt on this card to zero.

Make a plan to pay off all your debts: All debt reduction takes time but is worth it in the long run. Many people find it more motivating to pay off smaller debts first and then put together a plan to tackle your larger debts.

Review insurances: This doesn’t mean cancelling them; it means ensuring you are not paying too much and that you only have what you need.

Shop around for bank accounts, utilities and credit cards: Don’t expect to be rewarded for your loyalty. New deals come out all the time so shop around and take advantage of special deals for new customers

Smooth out your bills: Do you find that some months are more expensive than others due to big bills, birthdays or unexpected events? Here's how you can smooth out the ups and downs of your expenses:

• Mark your calendar for when your ‘big’ bills are due
• Add up how much these ‘big’ bills cost you, then divide by 52 (weeks in the year).
• Set aside this amount in a separate bank account each week so that it won’t be a shock when the bill comes around.

Ask about bill smoothing: Contact your utilities provider (gas, electricity, water) and ask about 'bill smoothing'. See if you can arrange to make fortnightly or monthly payments to them, instead of having to pay the whole bill in one go.

Salary sacrifice into your super: Save more for your retirement by sacrificing some of your salary and making regular payments into your super. For most people this will be a very tax-effective way of boosting your super balance.

To see how an LGS financial planner could help you with your budgeting, or many other financial planning matters, you can request an appointment by calling 1300 LGSUPER (1300 547 873) between 8.30am and 5.00pm, Monday to Friday.

Issued by LGSS Pty Limited (ABN 68 078 003 497) (AFSL 383558), as Trustee for Local Government Super (ABN 28 901 371 321). This document contains general information only and is not a substitute for personal advice as it does not take into account your investment objectives, financial situation or particular needs. Accordingly, you should seek professional personal advice and refer to the relevant Product Disclosure Statement at lgsuper.com.au/PDS before making a financial decision.