12 Tips to budget your way to financial freedom

Whether it’s credit card debt or using home equity to access credit, Australians have one of the highest rates of debt in the world and many of us are struggling to keep up.

These budget tips will allow you to save money on expenses and help decrease your debt to achieve the financial freedom you deserve.

Tip #1: Get money, borrowing & budget savvy

From getting to know your personal spending habits to facing you debt head-on and creating a realistic debt repayment plan, putting effort into your own financial education and planning is priceless and will make a noticeable difference to your pocket.

How to improve your financial knowledge:

• Download your bank statements and review your spending on a regular basis.
• Get to know what you’re paying in the form of bank fees.
• Analyse your debts and create a debt repayment plan (see tip #12).
• Review your debt agreements and get to know the T’s and C’s of any financial products you make use of or want to make use of.

Tip #2: Stop taking out loans & using credit

In order to achieve financial freedom you will need to pay off your debts and to do this you will have to make a commitment to avoid taking on any new debts.

This means cutting up your credit cards and staying clear of payday loans, store credit and any form of debt. It helps to get your partner onboard with your financial goals and have them commit to staying clear of debt too.

Tip #3: Live within or below you means by downscaling & cutting housing costs

One of the most costly expenses in any budget is housing. It can take up more than 50% of our income and in cases where we’re living above our means even more.

If housing is draining you income dry, consider downscaling by renting a smaller and cheaper apartment or house or simply looking for a cheaper alternative. You may also want to consider moving closer to your work to help you reduce commuting costs and just simplify your life overall.

Tip #4: Shop around for better deals on everything from gym memberships to insurance & credit cards

Shopping around for cheaper deals on everything from gym memberships to credit cards has never been easier. With loan comparison sites alive and well and multiple review platforms that can point you in the right direction, there’s no excuse for carrying heavy expenses when it comes to products and services you subscribe to.

You may want to contact your current providers and find out if they have any new deals or are willing to offer you a more affordable option if you find other cheaper options and want to make things easier for yourself by not having to switch providers.

Tip #5: Cook at home & use meal planning to save

Not only does meal planning help you save money but it avoids waste which is something that we all need to avoid. Plan out means for at least a week in advance and ensure all food stuff and fresh produce that you purchase will be used for the planned out meals.

You must also avoid eating out and buying take-away meals which is unnecessary spending that can really set you back. If you can’t completely stop eating out, start by reducing the number of outing and fast food meals until you’re left with just one or two a month.

Tip #6: Stop buying stuff

Many Australians are in serious debt simply because they decided to follow through with impulse purchases which they didn’t really need but felt that they wanted at the time.

From clothes and shoes to the latest phones and electronics, consumer purchases are setting us back and keeping us in unnecessary debt for years. The simple solution to this is to simply stop buying things that you actually don’t need and stop taking out short-term credit to pay for it.

Tip #7: Cut down on expenses where possible

Apart from cutting down spending on housing and food, you may also be able to save more money by cutting down on expenses in other areas. Perhaps this will take the form of car pooling rather than driving to work, being mindful about electricity consumption or simply cutting down on bad habits and outings.

Cut down on spending by:

• Saving on fuel costs by using public transport or carpooling.
• Moving closer to work and saving on transport or fuel costs.
• Look for cheaper options and special deals on outings and entertainment.
• Save on utility bills and switch to alternative, eco-friendly options where possible.
• Avoiding eating out and buying expensive coffees and drinks by making yours at home.
• Buying in bulk and meal planning to save money on groceries.

Tip #8: Make saving a habit

It rarely matters how much someone earns as much as it matters what we do with what we earn. Even high income earners get into debt and find themselves in over their heads.

To avoid letting debt take control of your life, you have to make saving rather than spending a habit! One of the best ways to do this is decide on an amount you want to save every month and then have a debit order set up to remove this amount from your monthly salary or weekly wages.

This will not only help you develop a habit of saving but will remove the temptation of using any extra money by getting it out of your everyday transactional account and out the way!

Tip #9: Make use of ANZ’s Saver Plus Programme

Whether you want to save for your children’s education or attend vocational training yourself, a good way to get going is by making use of ABZ’s Saver Plus Programme. The Save Plus Programme is funded by ANZ and the Department of Social Services and carries no money fees.

You simply open an account and set a savings goal across a 10-month period. ANZ will match any savings you have in the account at the end of the 10 month term up to $500. In addition to funding education, this savings exercise will help get you in the habit of saving regularly, which is a healthy financial habit that we all need to develop.

Tip #10: Create a budget that works for you & review it on the regular

Many people get inspired to create a budget but very few stick to it long term. With so many apps and free budgeting resources available there’s simply no excuse for not having a budget.

It is also important to remember to review your budget regularly to make any changes and addition necessary as well as see if there are any categories within which you could reduce spending to save money.

Tip #12: Create a solid debt repayment plan

Creating a debt repayment plan will always begin with a review of your current debts. Once you know how much you owe, to whom and for what you can then create a debt repayment plan. You can choose to employ the snowball debt repayment method or the avalanche debt repayment method.

• The avalanche debt repayment method: this methods requires you to make all minimum payments on all of your debts and use any extra money you may have to repay the most expensive debts (i.e. the ones with the highest rates of interest), even if they are big debts with large balances.
• The snowball debt repayment method: This method requires you to stick to minimum debt payments but use any extra cash to repay debts with the smallest balances. This method allows you to simplify debts and get them out of the way but, may not be the cheapest option. The most expensive debts that also carry the smallest balances may very well include payday loans, credit cards and other short-term loans.