When it comes to budgeting your household finances, you may think you know where you spend your money, but sometimes when you dig a little deeper, you might be surprised or even shocked at just where your money is going. If you find your money is going out just as fast as it’s coming in, and you’re not sure why, it’s probably time to start putting some plans in place to manage your money better. Here are 5 simple tips for better cash flow management.
Create a budget
If you don’t already have a budget in place, create one now. This should be your first priority when it comes to cash flow management. Knowing how much you spend and on what is the first and most vital step on your financial planning journey. Include absolutely everything that is essential – such as mortgage/rent, car loans, personal loans, credit card repayments, utilities, mobile phones, grocery shopping, internet, insurances, etc. Then add everything else you currently pay for such as Foxtel, after school activities, eating out, socialising etc.
Monitor Your Spending
Now that you have created a household budget, look back at your last 4-6 months of bank statements and take a good hard look at where you’ve been spending your money. Have you bought a flat white every day before work? That’s $20 a week just on coffee. Are you eating out regularly each week? Do you buy a new pair of shoes every month or a case of beer every Friday for the boys? All these ‘little extras’ add up to create substantial spending habits and you may not even realise just how much they are costing you in the long run.
Set Financial Goals
Having a budget in place is great, but you need to know what you are budgeting for too. Set financial goals (your financial planner can help you prioritise your goals) so you have specific targets in mind. Do you want to save more for your superannuation so you can retire earlier? Do you want to buy a new family car or save up for your annual overseas holiday? Do you want to save for your children’s education? Having tangible (and realistic) financial goals allows you to create a secure financial future for yourself and your loved ones.
Set Up An Emergency Fund
Creating a cash surplus gives you a financial safety net if the worst were to happen. If you lost a regular income and were unable to meet your financial commitments such as your mortgage repayment, car payment or even just your regular household bills, having an emergency savings fund available could help to ease the pressure before any personal insurance policies were to kick in.
Manage Your Expectations
Don’t forget to manage your expectations. If you’ve gone from spending freely to trying to stick to a much tighter budget, it’s not going to be easy. Set aside an amount each month for ‘fun’ expenses, even if it’s something small like hiring a movie and getting some treats for a family movie night. If you’re tempted to splurge on something that’s not in your budget, ask yourself if you really need it and see if there is a more affordable alternative.