5 simple steps to get on top of your money, starting now

Updated: May 18

While it’s a common new year’s resolution to get on top of your finances, it’s often easier said than done.

A simple rule for wealth creation is to spend less than you earn. For most people, we have limited scope to adjust the ‘earn’ side of the equation, so we have to, therefore, focus our attention on the ‘spend’ side.

Here are five steps to help you end up with more in your pocket (or less debt) by the end of this year.

Separate “essential”, “luxury” and “savings” money

This “bucket method” can make spending and saving simple. By allocating your pay packet to these three types of spending (which may mean having three separate bank accounts) as soon as you get paid, helps make it very clear when a bucket is nearing empty.

If you are allocating to the essentials bucket properly, this should never fall short (with adequate planning of course). If it does temporarily due to ‘lumpy’ bills or unforeseen expenses, you may ‘borrow’ from your savings bucket and then pay it back (don’t cheat yourself).

As for the ‘luxury’ or ‘discretionary’ bucket, it helps us recognise when enough is enough. If the money in this bucket is running low for the month, it’s time to reign it in and take it easy. If there’s plenty in there, we can live a little and not feel guilty.

Embrace personal finance apps

In a world where nearly everything we buy is on a credit or online, it can be difficult to physically separate our money. But thanks to technology, we can have our bank accounts and our credit cards tracked electronically – and with some apps – you’ll even get alerts when a bucket is running low.

PocketBook is one of our favourite personal finance apps and one that many of our clients have found to be helpful and user-friendly.

Consider ‘open’ goals as opposed to ‘fixed’ goals

Common theory has taught us that goals should be specific and measurable such as “this year I am going to save $50/week and by the end of the year I should have $2,600 saved”. But new research is suggesting that these types of goals can sometimes limit us or even worse, discourage us from saving.

Another option is to set an ‘open’ goal or a challenge if you wish, such as “this year I’m going to just see how much I can save”. There is no target or limit and often we perform better with this type of goal.

If you have found specific goals unsuccessful in the past, perhaps try an open goal.

Consider a fourth ‘bucket’

Sometimes life happens and circumstances or opportunities cross our paths that we didn’t plan for. Having a buffer account can be a lifeline in these situations. Consider putting 5-10% of what you earn into a fourth bucket and we guarantee, you will thank yourself later.

Try visualisation and mindfulness

Sometimes it can help to take five minutes out of your day to think about what you would like the future to look like and how you would feel if you got there. Practicing mindfulness allows us to re-focus our minds on the important things and let go of the little things, allowing us to make better spending decisions throughout the day.

Being mindful and letting yourself take a moment to think before we swipe our plastic, gives us the chance to gain perspective and think rationally. We recommend you have a default saying, perhaps something like “is this going to make me happier in a year’s time?” before spending over a certain amount.

If you would like to discuss your personal situation, we’d love to hear from you!

Talk to us today.

*Please note that the information provided is of a general nature only and has not been tailored to your personal circumstances. Please seek professional advice prior to acting on this information.

#budgeting #personalfinance #spendinghabits

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