Whether you’re saving up for a dream project or to clear credit card debt, personal finances expert Melissa Meagher sheds light on the budgeting practices she teaches her clients. These expert tips will quickly transform the way and speed you get a handle on your money.
Finances are similar to when we get up in the middle of the night – we kind of know where everything is but keep bumping into things and it isn’t until we switch the light on that everything becomes clear.Melissa Meagher
This can very much be the case with our money – we have a rough idea of what is going on (often in a very reactive way!) but it is not until we pull the curtain back and shine the light on our finances that we can fully and truly understand our situation. It can happen for a myriad of different reasons – from being time poor and generally disinterested to being in total denial and absolving all responsibility…and everything in between!
What I am going to share with you is some tangible steps you can immediately implement to feel empowered and in control of your financial destiny.
Review your fixed costs
A very simple way to free up cash flow and enables you to channel funds to other areas is to review your Fixed Costs.
A Fixed Cost is anything you pay on a regular ongoing basis and is usually a similar amount – it can be paid weekly, fortnightly, monthly, quarterly or annually.
Examples include the following:
- Council Rates
- Body Corporate
- Phone/Internet/Pay TV/Streaming Services
- Loan Repayments
- Charity Contributions
- School Fees/Extra Curricular Activities/Child Care
The first step is to list out all your Fixed Costs, the amount you pay for each one, how often you pay, and can they be reviewed?
This doesn’t have to be difficult or time-consuming contrary to popular opinion!
Usually all you need to do is contact your current provider and ask them for a review of your policy/plan/cover and let them know you are having a look around!
They will usually offer you some financial incentive to stay with them and if not, there are some fantastic organisations around that can support you with the “compare and contrast” of other providers.
Track your lifestyle spending
Next step is to track your Lifestyle Spending for at least 30 days – and yes that means everything!
This is anything that is not a Fixed Cost and covers what you spend on a daily basis every time you wall out the door and put your hand in your pocket!
- Entertainment/Eating Out/Takeaway
- Personal Grooming
This is not about making it right or wrong, good or bad – it is purely a data gathering exercise to understand where and what you spend your money on so you are then able to make educated and informed decisions about your money. You are then able to redirect spending to other areas if you want to do something different (e.g. reduce debt, build wealth, cash reserves, holidays anyone?)
Knowing where your money goes gives you freedom and choice about where you want it to go!
This can be done in the following way:
- Keep your Eftpos receipts and record it manually in a notebook (old school style!)
- Use an App on your phone – through your Bank, Pocket Book or Money Brilliant
- Record the data in a Cash Flow Template using Excel (good for couples wanting to collate their information)
Get efficient –structure is king!
I always ask every person I support the following question – Does your current structure help you or hinder you to manage your money?
What I am referring to here is the flow of your funds streamlined, seamless and automated or is it more clunky with lots of human involvement (I usually find the more human involvement the less likely things will actually get done!)
The first area to have a look at is to review your bank accounts:
- List out all your Accounts
- Investigate what Accounts you are paying fees
- What is the reason for having each Account?
- Do you need all these Accounts?
- Can I make the flow of funds more efficient?
A strategy I personally (and my clients) find very powerful is separating out your Fixed Costs and Lifestyle Spending into two different bank accounts. This has a number of significant advantages and is a fabulous way to gain absolute clarity, awareness and efficiency with your money management.
Consider the following…
- Once you have reviewed all your Fixed Costs enter them into the Budget Planner – https://moneysmart.gov.au/budgeting/budget-planner
- Nominate your pay cycle (e.g. weekly, fortnightly, monthly)
- This will provide you with a figure to cover all your Fixed Costs for the year
- Set up a separate Bank Account and name it “Bills Account”
- Organise an automatic transfer from your Everyday Account for the figure from the Budget Planner
- Pay all your Fixed Costs from this account – Direct Debit and Bpays
The strategies and tools I have shared are giving you the ability to move from the Probability Vector to the Possibility Vector and take inspired action to make a change to your current situation if it is not exactly how you would like it to be.
Always remember progress over perfection!
Let me know if you would like to catch up for a Strategy Session to discuss where you are at – link to book http://bit.ly/MelissaMeagher – I am here to support you!
Until next time take care,
If financial literacy creates the road to a more enriched life, Melissa Meagher is laying the tarmac. Her passion for finance combined with a desire to educate women and couples about money management will empower us to make financial decisions with confidence.