How to set up a fool-proof budget to apply for a loan
All of us at some point have wished we had more money in our account. Whether it’s a daily wish or only something that happens once every so often, it can’t hurt to have some systems in place to ensure you’re making the most out of your income, particularly when it comes to purchasing property or assets.
The first step of taking control of your finances is to pay attention to your cash flow. This is essentially tracking everything you have consistently coming in and out each month. From here, you can set up a fool-proof budget.
Step one – Get specific with your income
This is essential to setting up a budget and will be easy enough for PAYG employees with no side hustles as the money should be consistent with each pay cycle. Anyone that may be self-employed will find it more complicated to set up a budget due to irregular income, though it’s not impossible! The simplest way is to average your income over the last 6-12months and go from there.
Step two – Now track that spending
Have a look at your bank statement, and start writing down all your regularly occurring and essential expenses each month, and filter down to category. These can be classified as Rent/Mortgage, Bills, Transport, Food, Subscriptions, Health, etc.
Step three – Highlight the end goal
Do you want to save a deposit? If so, when is the date you want it by? A lot of our clients will set yearly goals, and save a set amount within the year. If you set yourself a goal like this, you then need to break it up into how much each pay run, or each month that you need to save. Want to save $10k in 12 months? Easy! That’s around $195 a week, $385 a fortnight, or $835 each month (approximately) that you now need to commit to saving away.
Step four – Now cut down
Once you’ve knocked essential expenses out of the way and have your end goal in sight, have a look at areas you can cut down on spending to ensure you meet your saving amount each month. Have a look at your bank statements again and see the areas you can afford to save. Seeing that $4 coffee charge at your local cafe too often? Either switch to homebrew or try and cut down by only going once a week or every second day instead of every morning. Cutting a $4 coffee, while seeming like a tiny amount to spend each day, can save you over $1400 over a year period – and that’s without even trying too hard! It is also very important to be realistic here on what you can cut down. Don’t opt to half your grocery budget or stop eating at restaurants all year when you know you’ll have events on where it’s necessary. Setting up realistic limitations around this will be easier to stick to, and won’t cause you to cut off all your loved ones. Instead of eating out twice a week, maybe cut down to once a week or once a fortnight and see how you go!
Step five – Don’t carve in stone!
Setting up a budget and sticking to it is essential to achieving your finance goals, though if you feel it’s not serving you as well as it could then it could be time to revisit. Ensuring that your budget stays relevant as circumstances change is crucial when it comes to adherence. Revisit each month, and assess the areas you may be struggling in, and change it around to suit you better.
Did you know that our experienced brokers have access to budgets to help you achieve any finance dream you may have? Get in contact today and we can connect you with someone in your area.