How to Save Money - The Ultimate Guide to Wealth

Reducing your expenses is one of the best ways to increase your savings. By spending less each week you will gradually build up more money to inject into interest earning investments. We list some of the ways to reduce expenses below

Basic Living Expenses

These are generally the most difficult expenses to reduce, but reductions may be necessary if your basic living costs are higher than your income.
Food & Shopping

• Instead of buying food and a drink, pack your own lunch for work or school. An average lunch costs $10 and a drink can cost about $3. If you buy both two days a week that’s $52 a fortnight and $1352 a year.
• Be organised about your shopping – shop at the same time every week (or fortnight), know how many meals you need to shop for and make a list of what you need before you go to avoid impulse buys.
• Shop at a supermarket that is close to you so to save on petrol costs.
• Look at catalogues to find the best buys. Some food items are cheaper in bulk and can be frozen such as meat and bread. Many perishable items are reduced just before closing time.
• Avoid buying junk food and pre-packaged dinners. Not only are they bad for your waistline but fresh meals and snacks are cheaper.
• The size of packaging is often misleading – compare weights (written on the packaging) when comparing prices.
  Use cloth nappies instead of buying disposable nappies. Make your own baby food instead of buying it.

Clothing
Use clothing pools for school uniforms and go op shopping for unique bargains.

Income

First you need to work out and write down your net income. You can find your net income on your payslips or Centrelink statements. You could also check your bank statements or tax return. Include any new income that you may expect.

You will need to distinguish between:

• Gross Income - your income before tax and other deductions are taken out
• Net income - your gross income minus tax and other deductions such as superannuation. Net Income is what you actually receive.

Tip: Your income is all regular money you receive including child support and the family tax benefit.

Expenses

Next you need to work out and write down all of your expenses. Most important are basic living expenses such as rent, utilities, clothing, food and transport. You also need to include other necessities such as insurance and medical expenses. Leave a gap or use headings so you can easily see which are your living or essential expenses and then work out and write down luxury or easily reduced expenses such as gifts, regular trips to the movies, shopping, takeaway or holidays.

Caculations

Now that you have written down your income and expenses:

1. Add totals for each.
2. Deduct living and essential expenses from your income. The amount that is left is called your disposable income.
3. Deduct your luxuries and other non-essential expenses from your disposable income.
4. The amount (positive or negative) that is left after this is your balance and can tell you a lot about your financial situation.

Congratulations! You now have a record of your income and spending. Now you can see where your money comes from and more importantly where it goes!

Before you begin you need to decide if your budget is going to be weekly, fortnightly, monthly or yearly. Most people find it helpful to make their budget match how often they get paid. You will need to convert all of your income and expenses to match this time period.

The following chart allows you to convert your budgeting periods

Example: if you have a quarterly gas bill but a fortnightly budget you would multiply the gas bill by 4 to get the yearly amount and then divide the yearly amount by 26 to get the fortnightly amount.

Be organised

To make an accurate budget you need to keep a record of your income and your spending - you need to be organised.
Most people find it works best to have a filing system such as a filing cabinet where you can keep your payslips, statements, bills, receipts and other financial records. You may also find it helpful to keep a diary or a payment & cash receipt book.

Tip: If you have not kept your past payslips, statements and bills most companies will provide another copy on request, although they may charge an extra fee for this.

Our first guide is budgeting. If you want to save money having a budget makes it much easier.

This series will provide you with a step by step guide into creating a good budget. This will cover:

1. Budgeting basics
2. Pre-budget organisation
3. Income
4. Expenses
5. Calculations
6. Budget presentation

What is budgeting?

Budgeting is the process of balancing your income with your expenses, and saving what you can to achieve your financial goals. A budget is a plan of how you will manage your income and spending in the future.

You may not realise it, but every day you make budgeting decisions. When you make a choice between the cost of eating at home and eating out or which brand to buy at the supermarket you are budgeting.

This ‘micro budgeting’ is helpful but it is also important to have a ‘macro budgeting’ – a ‘big picture’ so you can see what you spend compared to what you earn. When we refer to budgeting in this booklet we are talking about macro budgeting.

Why is budgeting important?

• Everyone is on a limited income, a good budget will help you to get the most out of your money and avoid debts
• Budgeting can help you achieve your financial goals whether it be buying a new TV, going to a concert or buying a car
• Budgeting can help prevent you stressing over money
• Budgeting can give you a sense of control over your finances and your life
• If you can see where your money is going, it can help you manage your expenses more effectively

The next step is pre-budget organisation

What is Mind Your Own Money? 

MYOM is a new iniative that makes you financially smarter. This blog will feature tips, ideas and guides inspiring you to:

• develop your financial literacy
• get the most bang for your buck
• build wealth and save money

MYOM will be updated regularly so check back often or subscribe to either our RSS feeds or mailing list!

Who are we? 

MYOM is run by the Australian National University (ANU) Students in Free Enterprise (SIFE) team.

Although we have a long acronym, ANU SIFE has a simple mission:

to deliver outreach projects that educate and enhance the community in entrepreneurial and business skill. ANU SIFE is a self-funded not-for-profit organisation run by a small group of talented intellectuals.

For more information see the ANU SIFE website.