Back to basics

But don’t be deterred: budgeting doesn’t have to be painful, and done the right way it will make life easier, and ultimately create more wealth for you.

Whether you’re striving to save for a deposit, or you’re just about to make your first repayments on your mortgage, a well structured budget can have a major impact on helping you achieve your financial goals.

Let’s face it, if you’re a generation Y-er like myself you may not have a huge amount of cash to play with when it comes to the property market, so it makes sense to use what you’ve got effectively.

So what exactly is a budget and more importantly, why start one? A budget is simply a spending framework for you to follow on a daily, weekly and monthly basis.

Your budget will help determine what you need to spend on your regular bills as well as establishing how much discretionary spending you have available – taking into consideration your other financial goals.

If you’re in the process of saving for a deposit, setting a budget is essential as it will not only help ensure that you’re taking the most efficient approach to your saving strategy, it will also help establish a timeframe to work to.

For example, if you need to save $20,000 for a deposit for your first home, and your budget reveals that you have the capacity to save $800 each month, you know that it will take just over two years to reach your goal.

All very good in theory, but how do you go about setting – and sticking to – your budget?

The golden rule when budgeting is to make it realistic, effective and achievable. Drive yourself too hard and you’re sure to come unstuck and end up abandoning it; go too easy and you’ll never see any results.

If you have a long term goal that’s going to take a couple of years to achieve, you’re going to find it hard to stay focused. To keep yourself motivated set yourself milestones along the way and reward yourself for your diligence with each goal met; this will also give you the chance to review the effectiveness of your budget.

If you’ve stuck to your guns, look at giving yourself a small blow-out every three months or so.

That could be a night out, a little retail therapy or a weekend away – as long as it doesn’t put too big a dent in your hard earned savings.

It’s also important to look at where you stash those extra bucks as they build up each month.

If you’ve never saved before, you’ll quickly find that seeing your bank balance grow is very rewarding. But rather than leaving your cash in a low interest current account, look at tucking it away in a high interest savings account or term deposit.

You’ll not only see your savings grow faster with the extra interest, you’ll also put your cash a little further beyond temptation’s way.

Shop around for deposit accounts because there may be a difference of a full percentage point in interest rates –don’t just pick the account your bank offers without doing a bit of research.