They say knowledge is power and when it comes to your finances, that sentiment certainly rings true. Understanding just how much money is going in and out of your bank account is the key to determining exactly what you can afford today—and maximising your savings in the long run. Ready to get started? Try these expert tips and tools.
Get a clear picture
Your bank balance provides a snapshot of your finances, not the whole story. Have your bills been accounted for? How about rent and other essentials? Considering these will give you a more accurate picture of your “true” balance and how much you have to spend.
“Many people know the roller-coaster of feeling rich on payday and broke days later,” says Lexi Smith, financial coach and founder of MoneyVine. “I would encourage everyone to calculate their net worth (what you have minus what you owe). Once you know that number, you can work out how to improve it. Try mapping out your year ahead to determine if you have a surplus (income higher than expenses) or a deficit (expenses higher than your income). By doing it yearly, you’ll highlight less-frequent expenses, including any quarterly or annual bills.”
Commit to tracking
To budget successfully, you need to be honest about your spending—and the best way to do this is by tracking your finances. CommBank’s online Financial Fitness program suggests you commit to writing down every single time money leaves your account, from big bills to your morning coffee run. At the same time, keep an eye on your bank account so you’re across all your regular transfers (hello, forgotten streaming subscriptions and gym memberships you don’t really use). Sometimes digital payments feel like “free money” but by tracking your spending, you’ll see how expenses add up.
Spend smarter
Once you have a grasp of your financial situation, it’s easier to make your budget work for you. Before each payday, give every dollar a job—divide your money among essentials, savings and guilt-free spending, such as your weekly brunch with friends or that concert you’re dying to attend. How can spending be guilt-free? Because you’ve already put money aside for it and made sure it works within your financial goals. To that end, always think before you tap. A quick pause can help stop those impulse purchases you hadn’t planned for in your budget.
Don’t live in financial denial
If you tend to avoid examining your finances—whether it’s because you feel intimidated or struggle to concentrate on the numbers—there are ways to change your behaviour. Take it slowly, advises Smith. “Chances are you’re feeling overwhelmed. Working out your best next step and focusing solely on that can be a great way to make progress in the right direction. The first step can be as small as logging in to internet banking. Once you’re there, decide what the best next step is.”
For those who think tracking your spending sounds about as fun as a trip to the dentist, it can be helpful to turn it into a regular “money date”. Make yourself a cuppa, grab a sweet treat and pull out your spreadsheet. By your last sip, you’ll have a better idea of how you’re tracking financially and you’ll improve your chances of dodging that “Where did all my money go?” spiral.
“Many people know the roller-coaster of feeling rich on payday and broke days later.” - Lexi Smith, financial coach and founder of MoneyVine
Enlist support
There are plenty of tools available to give you clarity and confidence on your money journey. Money Plan in the CommBank app can help you track your spending, set budgets for different categories (including eating out and shopping), predict and track upcoming bills, manage regular payments and give you a clear idea of your overall cash flow.
“Even going back to basics and exporting your transactions from internet banking will help give you a clear view,” says Smith. “But if that feels too much, too hard or too boring, reach out to a financial coach.”
Quick hacks for assessing affordability
- Use the 24-hour rule: Before buying anything non-essential, wait 24 hours. That pause gives you time to figure out if it’s something you really need or just a passing want.
- Try the “hours worked” test: Thinking about a $150 splurge? If you earn $30 an hour, that’s five hours of your time. It’s a smart way to weigh up whether something is really worth it.
- Check your “true balance”: Don’t just glance at your bank balance and assume you’re in the clear. Factor in any upcoming bills, subscriptions or savings goals before spending.
