Do you often head out to purchase groceries and find that you have somehow tipped over your budget? Or maybe you are guilty of heading to the shops to get the essentials and you find yourself walking out with a whole bunch of stuff that you might not necessarily need? Enter, the topic of overspending. Although you might feel that this particular topic is unique to you, it’s a lot more common than you imagine. We live in a world where everything is at our fingertips. The previous scenarios can occur more easily these days with the power of the internet - it is becoming increasingly common to find ourselves stuck receiving fantastic offers and specials from every corner on the earth online, at all hours of the day and evening. In today's article, we're going to dive into some thoughts around how to get back on top of your finances, and some methods to keep you on track moving forward.

Evaluation of your current position

1. Assess your current position

The first necessary thing to do is understand what your current position looks like. If you have already been using a budget, it will be easy to highlight whether or not you have money left after each pay cycle. If not, that’s fine - stick with us and we will get to it soon! For now, jot down what your current income is including the frequency that you receive it (weekly, fortnightly or monthly). Next, you need to jot down all of your current Expenses. One easy way to do this is to bring up your banking transactions (including any other bank account you might have outside of your main bank account), and scroll through all of the expenses that appear there. What you might find is a combination of one-off expenses (shopping, utility bills, night out with friends) and fixed ongoing expenses (rent, mobile bill). When having a quick look at this, this should give you a very high level understanding of what your position looks like.

2. Identify which expenses you are able to cut

Be brutal here. What you want to be looking for is any expenses that are not essential. Going out with your friends on a Friday night? You might consider cutting this altogether, or rather than cutting it in one go, you might consider reducing the amount you spend and only spending $50 instead of $100. Here’s another one, ongoing subscriptions that you’re not currently using, or not using as much as you should be. Have a browse through these expenses because you might be surprised how many ‘quick-wins’ there can be.

3. Negotiate better terms

If there are existing debts, there are certain methods you can use to make sure you’re in the strongest position to pay these down. One way is to speak directly with your creditor to negotiate better terms. Simply pick up the phone and let them know that you are completing a financial health check and require their assistance for better terms. Another method here is exploring the option of consolidation, which is where you combine all of your debts into one, subsequently reducing the overall payments and making it easier to manage. The size of the Debt will also need to be considered. It will generally make more sense to consolidate larger amounts of debts with banks, where small loans can be consolidated through smaller loan funders. Caution: ensure that you understand the numbers here so you can clearly see if you’ll end up better off.

Setting yourself up for future success

1. Define your goals short, medium, long

As the saying goes, if you fail to plan, you plan to fail. Get crystal clear around what you’re actually trying to achieve. If you’re looking to bust debt out altogether, write that down. If you’re looking to save for a house deposit, pencil it in. Thinking about it can only go so far. Writing it down starts the process of turning your goals into reality.

2. Recalibrate your income

Now it’s time to take a closer look to understand  how much money you have coming in, and when. First, have a look at your primary source of income, including any other sources of income you might have coming in. Take note of the frequency and when it is coming in.

3. Complete another cut of expenses - be brutal

And we’re taking this a step further now. You might have started to cut down, or completely remove some expenses within your budget, but we’re attacking this with another lens. Now is the time to be brutal. If you're goal is to get back on track as soon as possible, ensuring you are only including the essentials is key here.

4. Identify the frequency this budget will operate in

Now it is time to understand the frequency that this budget will operate in. If you are being paid weekly, this should be a weekly budget, if fortnightly, then the budget fortnightly, and so on.

5. Create a revised budget

Understand what your surplus will be i.e. money left over after all expenses are covered through the creation of a budget. An awesome resource to check out is the Budget Planner available from the Government’s Money Smart website - click here to use this. It will guide you through everything you need to review and generally takes about 20 minutes to complete. Start with small amounts.

If there’s nothing there, be ruthless on your expenses again to find opportunities to do so. If there is nothing at all there, consider working a second job / side hustle for additional income.

If your situation is terrible, consider approaching a financial counsellor for assistance around structuring budget and negotiating terms with creditors to get back on track. Money Smart is another great resource for this and you can find more information by clicking here.

6. Automate whatever can be automated

Once your budget is completed and ready to put into action, you want to make following this as easy as possible. This can be achieved through automating some of the tasks required to maintain your budget, including:

• Setting up automatic payments to debts, credit cards, loans etc.;
• Setting up an automatic transfer for your ‘emergency / rainy day fund’; or
• Setting up a separate account for your ‘weekly/fortnightly/monthly’ spending amount, and having this amount automatically transferred to this account each time your pay comes in.
  

7. Check in regularly with your budget

Success here is really going to come from first setting this up, and the other half will come from ensuring you are measuring how you are tracking. Set some time aside to reflect on the progress between you pay periods and to also reinforce your goals. Doing this will allow you to monitor how you are tracking, including being able to see incremental improvements to the finish line.

8. Reinforce your new budget habits

If you keep this up you should be on the way to getting on top of things. Remember, the more you stay on top of your finances, the easier it becomes. Ensure you reinforce these good habits by reminding yourself of the progress made, or even treating yourself to a dinner when you achieve smaller milestones along the way!

We hope this information finds you well and you find value in the tips we’ve discussed here. Overspending can be common, but by honing in on where this is occurring and setting up a robust budget, you’ll be well on the way to be the master of your own finances!

The opinions expressed in the Blog are for general informational and entertainment purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific investment product.  It is only intended to provide education about the financial industry.  The views reflected in the commentary are subject to change at any time without notice.