Starting a budget isn’t that tricky and it’s a great way of getting a head financially.
Starting a budget when you land your first job is the best way to build good saving habits and get the most from compound interest.
Congratulations! A first job is a big thing. Take your best friend out for an ice cream, buy your mother some flowers, then start a budget.
Starting a budget now will do three things:
- Help you establish good savings habits, which you will have for the rest of your life.
- Gets you building wealth early, so you get maximum returns from compounding investments.
- It puts you in a better position to do some of the ‘big things’ later in life. You know; have children, travel around the world for a year, start a business, buy a house.
Don’t worry either, a budget doesn’t have to be complicated or restrictive.
All you need to do is pick some goals and figure out when you want to achieve them. Here are some simple steps to get you start on your budget:
Set yourself some goals.
If you already know you want to quit your job one day and travel around the world that is your goal. Work out when you want to do it and how much it will cost you. You might have multiple goals, that’s fine.
Figure out how much you need to save each week.
You already know how much you will need and when you need it, so simply divide the total amount by the number of weeks left until your goal date. This is how much you need to save each week.
Set up automatic payments to a savings account.
If don’t have one already, look for a savings account in Australia with low/no fees and a competitive interest rate. If it’s possible, have employer to split your pay so some goes directly into your savings account. Otherwise create an automatic, reoccurring transfer which matches your pay cycle. Set it to transfer the amount you figured out above every time you are paid.
Choose a lifestyle that fits with the money you have left over.
A household budget planner or calculator can help you work out your expenses. Once you are saving for your goals, then enjoy your money. This is the beauty of saving first; it almost doesn’t matter what happens after that. One word of caution, though; consider unexpected expenses or once off payments. It’s good to keep a ‘backup’ amount you can use. Don’t waste money, but also don’t feel guilty about spending once you’re achieving your goals.
Once you have your budget worked out here are some simple steps to help you make it work:
- Track your spending periodically. It doesn’t have to constantly, just do it for a couple of weeks now and then. It will help you understand where your money is going.
- Make small increases your savings rate. Why not challenge yourself to increase your savings rate each month, even if it is only by $10.
- Focus on what your budget is allowing you to do, not what it is preventing. Every time you save some money you are achieving a little bit of your goal.
Starting a budget when you land your first job is the best way to build good saving habits and get the most from compound interest. Don’t put it off. Set some goals, save first, then spend.
Checkout our budget tool on our website. www.savings.com.au/calculators/budgeting-tool