Key takeaways
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Create a budget: aim to make it an accurate description of how your finances work. See where you could be spending more or spending less.
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Create an emergency fund: putting aside even $50 a month can really add up.
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Be honest with yourself: you need to name the spending problem to figure out the right long-term solution.
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Ask for help: there are plenty of services out there that can help you take back control. You don’t have to figure it by yourself – talk to an expert.
Don’t let your finances stress you out. Instead, take back control by following some simple steps.
1. Budget, budget, budget
One of the easiest ways to start getting your finances back on track is to make a detailed, realistic budget that you can stick to.
Assign your expenses to a broad category, like groceries, dining, entertainment, housing, transportation, taxes and insurance. Also tag each expense to indicate whether it is discretionary (a want) or mandatory (a need). And be realistic about whether an expense is mandatory.
The key to creating a successful budget is not setting unrealistic goals about how much you are going to save and how much extra money you will earn. Instead, use your budget to accurately track and describe how your finances work. Having a good idea of how much money you actually have, spend, and can save is the first step toward true financial wellbeing.
Moneysmart’s budget planner is a quick and easy budgeting tool that can help you get set in the right direction.
2. Set up an emergency fund
Another way to reduce financial stress is to start building an emergency fund to cover unexpected costs. Ideally, you want to have enough stashed away to cover all your daily expenses for a few months.
If you are struggling with debt, building up a huge emergency fund might seem unrealistic. However, putting aside even $50 a month will quicky add up to a useful emergency fund.
3. Be honest with yourself
After making a budget and starting an emergency fund, it might be to time to face up to some hard truths. Frequently, people have no idea where their money is going, and they have no idea how all those separate purchases add up.
Once you start tracking your transactions, look at how many repeating charges are happening—from subscription services like Netflix and Binge, to your gym or other vendors. Think about whether you’re still using and enjoying those services. If you aren’t, unsubscribe!
Spending can also often emotional – addressing the underlying cause of your spending can help you gain control over it. A shopping list lets you plan your purchases in advance. Once you get into the habit of using a shopping list, you can use it to refuse to buy items that are not on the list.
Another tip is to translate money into time. That is, figure out how many hours you will have to work to pay for the item you want to buy, Taking the time to convert money into time will make the cost more tangible and less abstract.
4. Track your progress
As you begin to pay down your debt, make sure you track this progress! You can even reward yourself for your hard work by giving yourself an incentive. For instance, for every $200 you save, maybe spend $20 on a nice bottle of wine.
5. Seek help from an expert
Financial advice is a great way to help you when you are in financial stress. Some of the ways financial coaching can help you include:
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Budgeting: making sure you know exactly what’s coming in and going out of your accounts.
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Managing your debts: helping you eliminate credit card debt and reduce the amount of non-deductible interest you pay.
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Setting financial goals: by setting short-term, mid-term and long-term financial goals, you’ll be step closer to being financially secure. Getting a sense for when you might want to reach each goal can help you make choices about how to use money you’ve already saved and how to continue saving and growing your money to help meet those goals.
Call us if you’d like to discuss further.
This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. NULIS is part of the group of companies comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (‘Insignia Financial Group’). The information in this article is current as at June 2023 and may be subject to change. This information may constitute general advice. The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Opinions constitute our judgement at the time of issue. The case study examples (if any) provided in this article have been included for illustrative purposes only and should not be relied upon for decision making. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the Insignia Financial Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.