How to budget and save money

Saving money is usually the first step everyone learns when managing their finances. But sometimes you may feel like there’s more you can do. Perhaps you need some help saving for a holiday or a deposit for your first home. Whatever your situation may be, budgeting can be a useful tool to help you achieve your financial goals.

Learning how to manage your money may seem overwhelming at first, especially in a world with a multitude of complex and varying financial tactics — but the benefits can be invaluable when you find the right approach. With a simple budget, you could take control of your finances, review and prioritise expenses, avoid overspending, and potentially even set money aside for savings.

This article explores the basics of personal budgeting and saving, plus practical steps to keep you on track.

How to incorporate savings into a budget

Saving money can be difficult, especially if you’re on a tight budget. But with some creativity and determination, there are ways to save money regardless of your income level.

Consider the below tips to help you save money on a budget:

1. Calculate your monthly net income. Do you know how much money you bring in every month after taxes? With this number in hand, you can start to build a realistic budget that includes savings.
2. Consider the 50/30/20 rule. If you’re creating a budget for the first time, the 50/30/20 rule suggests allocating your money into three categories: needs, wants, and savings. You would allocate 50% for your needs, such as housing, food, utilities, and transportation. You would then allocate 30% for your wants, such as entertainment, dining out, and travel. Finally, you would allocate the remaining 20% for savings, such as an emergency fund, superannuation savings, or paying off debt. How much an individual sets aside for each category will depend on their individual circumstances and needs.
3. Set a goal. To help you stay motivated, consider setting a money goal to work towards, for example saving your first $5,000.
4. Avoid unnecessary spending. If you’re on a tight budget with little wiggle room for savings, consider looking for areas where you can reduce your spending. For example, you could cancel or share the cost of subscription services you don't use or reduce the number of times you eat out each week. The money you gain here could then be put into savings instead. Utilising an expense tracker can be a great way to find those places where you have unwanted spending.
5. Start small. If you can’t dedicate 20% to savings, that’s OK. Start with a small amount instead — such as $10 per week and gradually increase as you're able.
6. Automate your savings. Consider setting up an automatic transfer from your everyday banking account to your savings account each month. This could help you save money without even thinking about it. And utilising a high-yield savings account could help you save and earn interest at the same time, making your money go further. Always consider potential fees and other associated costs that may come with these types of accounts.

How to stick to a budget

Sticking to a budget can be just as tough as creating one in the first place — but can be essential for reaching long-term goals.

Here are some tips to help you stick with your budget:

• Break down your monthly budget into weekly buckets. It’s possible to keep a close eye on your monthly budget by breaking it down into weekly expense lists, so you know exactly how much you can spend each day.
• Use a budgeting app. There are many budgeting apps available that can help you track your expenses, set goals, and monitor your progress. Find one that works for you and use it consistently. Some apps may have fees and other associated costs.
• Find accountability. Consider sharing your budgeting goals with a trusted friend or family member who can hold you accountable and provide support if and when you need it.
• Reduce impulse spending. Avoid impulse purchases by making a list before you go shopping and sticking to it. Consider waiting 24 hours before making a big purchase to ensure it's a necessary expense.
• Reward yourself. Set small rewards for yourself when you hit budgeting milestones. For example, you could treat yourself to a favourite meal or activity when you reach a savings goal.
• Learn from mistakes. If you overspend or go off-budget, don't get discouraged. Instead, learn from your mistakes and make adjustments to your budget as needed.

Pointers for saving money

Stretch your dollars and make the most of what you have by considering these tips to save money:

• Cook at home. Eating out can be expensive, so try cooking meals at home. Look for simple and affordable recipes online and consider meal planning to save time and money.
• Look for free activities. Instead of spending money on entertainment, look for free activities such as community events, free museums, or parks.
• Shop smart. Look for deals and discounts on groceries and household items. Shop at dollar shops or buy generic brands to save money. Consider using coupons or buying in bulk to save even more.
• Use a shopping extension. A shopping extension can help you find deals, compare prices, save money, and sometimes get cash back while shopping online. You can get available promos and coupon codes automatically when using Honey by PayPal.