2022 was a rough year that put most of our country into an uncomfortable financial position as we navigated through seven interest rate hikes and increased costs of… well, everything – from cash loan rates to the cost of fruit and vegetables.
Here’s a 2023 budget bible to help you work through the 2022 financial hangover and help plan for the year ahead.
A date with your bank account
Yes, if you pop it in your diary as an event, the bitter financial reality pill may be easier to swallow. Set aside at least an hour or two, pour yourself a glass or cup of something, download this comprehensive expenses tracker and get to know your bank account.
This expenses tracker will help deep dive into what you think you’re spending your money on and what you’re actually spending your money on over a three-month period. By the end of your ‘date’ you will know your account intimately and will have built a strong financial foundation for your year ahead.
50-30-20 principle
The 50-30-20 budgeting principle is a great way to plan and allocate your budget.
Although the rule suggests the split be 50% towards obligatory monthly expenses like your rent or mortgage repayments and utility bills, 30% to wants and entertainment and 20% toward debt repayments and savings, we suggest a slightly different split.
We suggest using 50% of your after-tax earnings as the 50-30-20 principle suggests but shifting the 30% and 20% split slightly to increase your savings potential, which can be put towards your retirement plan or investments.
By increasing repayments on your home loan, for example, the additional funds paid can be accessed through a redraw account if you absolutely need to access these “savings”. If you don’t need to access them, you are achieving the goal of reducing your home loan that much faster.
Budget analysis
Once you’ve taken inventory of your monthly expenses and split your income, it’s time to be honest and strict with yourself and your budget. If that sports car pushes the monthly repayments allocation into the red, consider an alternative, more affordable option.
With the interest rate increases and effects on mortgage repayments, the pressure on landlords will be passed on to renters at some point, so if you’re currently maxed out on your rent budget, you’ll need to cut something somewhere else or start looking for something else that will offer you a bit of financial wiggle room.
Check what savings options, vouchers or offers your local council or state authorities have available. When it comes to extracurricular activities, these can prove hugely beneficial.
Shop around
Knowing where you’re getting the best bang for your buck in your local area is helpful. Yes, we agree that it’s easier to visit one store for all your household and grocery needs, but visiting two or three supermarkets may help you to save a few dollars a week – which will add up over the year.
Be careful though that you’re not spending more on driving to those other supermarkets than what you may be saving on a few items. You don’t want to end up just shifting the proverbial peas around the plate.
Do your research and find where the best prices are for meat, fruit and vegetables, household cleaning products and daily essentials. We know it can take some getting used to, but know your prices for things like meat per kilo, fruit and vegetables and things like washing detergent or dishwasher tablets.
Get help from a financial expert
Find a financial planner who is as committed to helping you effectively manage your monthly budget and achieve your financial goals as you are. Contact us to make an appointment.