BUDGETING STRATEGIES

So you're understanding your finances and building out your budget - now it's time to take those skills and learn how to create budgeting strategies to help you save money (and time!). These four strategies will definitely help you level up your money management.

"Treat your budget like a business - know what is coming and going,
and always run at a profit."
krystal kleidon
Creator

strategy 1

ANALYZE YOUR BUDGET

I cannot stress enough the importance of analyzing your budget, which is why I’ve included this as a strategy here again… it is THAT important. 

You cannot possibly move forward with your budget and with your finances if you don’t have a deep understanding of where you are and why you’re here. 

You can take the Financial Assessment Workshop here:

The key areas of your finances you need to assess are:

Current Income

So, you might be thinking that you’re pretty on top of your income situation, especially if you’re on a salary or have the same income each pay cycle. However… there are some things you might need to consider:

Do you sell unwanted items on Facebook groups or any of your local buy/swap/sell sites? If so, that’s awesome and this is INCOME! Make sure you’re tracking it! You’d be amazed at hoe much extra it can all add up to. 

Do you have a side hustle? Even if it’s sporadic income or what you’d consider ‘just a little extra’ this is all income that you can track as well.

The reason we should track this is because it’s important to get a really comprehensive view of our finances. One month I earned an extra $2000 from selling things on Facebook. That can make a massive difference to a budget or to achieving financial goals. 

Current Expenses

Not only is it super interesting to know what your current expenses are, it’s also really important for you to know too! Do you actually know how much you’re spending each month? Do you know how much your ‘minimum spend’ is? That is how much you spend at a minimum each month without frills? 

There are often so many small expenses we have each month that we don’t even notice. Amazon Prime membership, Netflix, your weekend wine…? 

Tracking and categorizing your expenses can be incredibly eye opening (you can find a really easy way to do this in the Financial Analysis Workshop above). 

Current Debts

I have to admit, there was a time when I had no idea just how much debt I was in – and I’m not alone. We all want to be debt free, but how can we work towards something that we don’t even understand? 

It is so important to take a current (and a regular) look at what debts you have and take note of their maturity date – when are they due to be paid out if you only make the minimum repayments on them? This can be quite eye opening and also motivating for paying them off sooner. 

STRATEGY 2

CUT EXPENSES

It seems pretty obvious doesn’t it… cutting expenses? But there are some great strategies you can use to cut your expenses down even further without actually having to remove anything from your budget. 

First of all though, you should go through all of your expenses and actually remove things that don’t need to be there. Often the easiest thing to eliminate (and can save quite a bit) are subscriptions or memberships you no longer use. 

But that’s just the tip of the savings iceberg. Use these strategies to help cut expenses even more:

Check Your Insurances

When was the last time you checked in with your insurances? I was always the person who just paid my insurances when they were due and that was it. BUT, you can save SO MUCH money by actually spending some time assessing your insurance policies and making sure they are right for you. 

You might find you’re over insured, are paying for things you don’t need, or have an old, outdated policy that is more expensive than it needs to be.

We check our insurances each year and this last year I was able to save another $200 by switching our car insurance to another provider. 

Re-Evaluate Your Phone Plan

This is another one of those things where I just kept paying my bill without giving it much thought… Now I check in on this regularly because there’s always new plans with new offers! 

The first time I did this I cut my monthly bill down from $160 to $80! That’s almost $1000 a year saved. Crazy! 

Sometimes I don’t actually save money but I get a better deal for the same price which is always good too. 

Ask For A Better Rate

There are so many areas where you can negotiate a better rate, and we don’t even think about it most of the time. But every dollar saved is more in your pocket (or towards your finance goals). These are some ideas for negotiating better rates:

Personal Loans – If you have any loans for cars, general loans, or even student loans, you can negotiate a better interest rate, often you simply need to ask. 

You can usually get a better rate if you have a history of making your repayments on time, or if your credit rating has improved since the start of your loan. 

Mortgage – One of our biggest expenses is often our mortgage, and while interest rates are fairly low at the moment, you may be able to negotiate an even better rate, or if need be, move banks in order to secure a better rate. 

This can be highly dependent on your individual situation so work out how much interest you’re currently paying and if moving banks would actually be worthwhile for you. 

Rent – So many people are surprised to learn that you can actually negotiate your rent! When your lease is up for renewal, rather than just renewing it, request a reduction in rent for a renewal.

Changing tenants costs money because it can often mean a home is left without a tenant (and therefore without rent) for a period of a few weeks. You can be super clever about this by doing some research and finding out how long homes in your area take to release or retenant and use that as a negotiation point.

For example, if you pay $1500 a month in rent, and it takes a month to find and retenant a home, then you may be able to negotiate a reduction of $100 a month ($1200 a year) which is still more cost effective for a landlord than finding a new tenant.  

Move House

If you’re really serious about cutting down your expenses, you may find that moving house is a good option. 

If you’re renting a home at the moment that is too big for you (we all love big spaces, but do we really need them?) then you may find that making a change to a smaller home can actually save you a ton of money. 

Keep in mind the cost of moving though. If it costs you $1500 to move and you’re only saving $1000 a year, then you might find you’re not actually any better off. 

Avoid Fees

Fees would have to be one of the biggest wasted expenses I could think of… especially overdue fees, or overdrawn fees – so frustrating!!! 

Do you know what you’re paying fees for? 

Most bank accounts and credit cards come with fees so grab your statements and go through them, highlighting your fees and work out how much you’re actually paying. 

You can find bank accounts with no fees, credit cards with no fees (check to see if their interest rates are higher though and check to see if it would be the best option for you) and be sure to pay your bills on time to avoid unnecessary fees! 

Sell Your Car

Before you balk at this one and keep scrolling past, just hear me out. 

Do you know how much your car costs you each year? While every country is different, here in Australia we pay registration, mandatory insurance, comprehensive insurance, road side assistance (optional) and that’s before you even take into account fuel/gas, and any loan repayments and interest rates if you have a loan. 

Cars can be so expensive… so why do we need them? 

Yes, transport… of course. But have you stopped to think about YOUR needs. 

For a long time we were a two car family, because… well… that’s what you do. You have two adults, you have two cars. 

But then we had some big financial goals we wanted to achieve, so we reevaluated everything and we realised we really didn’t need a second car. 

Before selling the car we decided to see if we could go a month only using one car and it was a breeze. 

So we sold it. And that was a huge step towards achieving our financial goal. 

If you live in a city with amazing public transport you might not even need a car at all! Of course you’d have to weigh this up with the cost of public transport for your needs, but it’s definitely something to consider. 

STRATEGY 3

DEEP EXPENSES ASSESSMENT

This is a deep dive and more advanced strategy, but one that can really pay off in the long run. 

If you completed the steps in the Finance Assessment Workshop, then this will be a lot easier for you, and doing this can mean that it’s a lot easier to keep this assessment current as your move towards your financial goals.  

The idea behind this deep dive assessment is to work out the ‘buckets’ or areas where you spend the most amount of money, and plug any leaks in that bucket you may find. 

What I mean by this, is going through your finances and actually looking at how much you spend in each category, then working out if a) you were aware you were spending money there, and b) if you really need to be spending money there. 

The way you categorize these expenses is entirely up to you, there’s no right or wrong way, but I have always had categories like ‘groceries’ and ‘cafe/restaurant’ as being separate rather than just being under ‘food’ for example. The more detailed you are with this, the more ‘data’ you’ll be able to pull and therefore get deeper into your analysis. For example, you might have a general spending category, but it won’t give you as much detail as a category that was ‘clothes’, ‘entertainment’, ‘cafe/restaurant’, ‘hobbies’, ‘sport’ etc. 

Once you determine the categories that make sense to you, you can then analyze your spending in each category and see if you’re spending more in a category than you want to be (or realise you are). 

An example of what you can do with this data would be when I gave up buying new clothes for a year. I hadn’t realised how much I had been spending on new clothes (I even had clothes in my closet with tags still on them… it was a problem), so I challenged myself to give up spending money on new clothes for a whole year. 

Diving deep into your finances like this can be quite confronting, but it can also show you a whole lot of data that gives you areas to work on, cut back on, and improve on in order to help you achieve your financial goals. 

STRATEGY 4

AUTOMATE

This is something I have touched on a number of times but is such a good strategy for saving money that I need to add it in here again. 

The best way to ensure your bills are paid on time, and to keep on top of your finances is to AUTOMATE! In a world where so many things are automated, we can use this to our advantage and automate our finances too. 

This strategy makes such a huge difference to the way you manage your money and your mindset around money. I had gone from being stressed about getting my bills paid, to barely ever thinking about it other than the occasional check in to make sure everything is going smoothly. 

My mum actually introduced me to this strategy years ago as a budgeting tactic when I first moved out of home. Having never had to pay for utilities myself, I was shocked when I received my first electricity bill, it was more than I could afford because I hadn’t been putting money aside for it.

She had told me to pay a little off my electricity bill each pay cycle so that when the bill came in, it was either entirely paid for, or wasn’t so big that I couldn’t afford it. 

While I had been doing this automation strategy for my electricity bill for years, it was only when I got really serious about my finances that I realised I could use that same strategy across so many different areas of my finances. 

And I kicked it up a notch too. 

One of the things I had struggled with previously was keeping my finances organized. I would often find that my account would be overdrawn when an automatic payment came out, or I didn’t really know how much spending money I had because I didn’t know what bills were coming out. 

So I separated my finances and created a ‘bills account’ and it changed everything!

Here’s how you can do it:

1 – Create a new account that is just for your bills. Make sure this account doesn’t have any account keeping fees attached to it and also don’t get a transaction card unless you absolutely have to. 

2 – From the previous analysis of your finances, you will know how much your bills cost you every month. These are recurring payments, things that you absolutely must pay (or choose to, like Netflix) each month. Work out how much this total figure is.

3 – Work out your irregular expenses that often catch you by surprise. Things like car services, yearly insurance, anything that ‘pops up’. Work out how much these cost you per year, then divide that number by 12 to determine how much you need to set aside for them each month. 

4 – Add the figure from step 2 to the figure from step 3 and you have how much money you need to set aside into your bills account each month. If you get paid monthly, then this is how much you need to put into your bills account each pay, if you get paid bi-monthly, then divide it by two. 

5 – When you are starting out, try to put a ‘buffer’ into this account if you can. To do this I just add a little extra into the account each pay. This means that if a bigger expense comes up you’ll have a little extra in there to help cover it. 

6 – Set up all of your bill payments to come out of this account, and only this account. If your billing company doesn’t offer direct debit, then set up an automated regular payment to go to them – most banks will offer this option.