CommBank personal finance expert Jess Irvine answers common payday questions.
What payday habits can help boost financial fitness?
The long-term goal should be to build a sufficient savings buffer so you don’t have to live pay cheque to pay cheque. But if things are tight, next payday, why don’t you sit down and map out all the expenses that you have upcoming until the next pay period, such as utilities, bills and other recurring payments?
Take a stab at estimating variable costs, too, like food and entertainment. Tracking your spending can be a great way to get to know how much you really spend from each pay so you can adequately cover both your fixed and variable expenses.
How much should I aim to set aside for savings?
There’s no one-size-fits-all approach; it really depends on your income and fixed expenses. Some people recommend saving at least 10 per cent of your pay but that may be unachievable. Don’t put too much pressure on yourself if your spending needs absorb most of your income. Remember that any small amount you can save is helping to look after future you.
What are some strategies to help pace my spending?
One of the biggest mistakes people make is spending too much, too soon. When that money hits your bank account, it can be a good idea to set up automated transfers into separate, dedicated accounts for everyday spending, bills, bigger expenses and long-term savings goals—that way, you whisk away the money mentally before you get a chance to spend it.
Alternatively, you may like to set an amount of money each payday for “fun money”—say, $100 a month, which you can spend on whatever you want. The 50-30-20 method is popular (basically, you allocate 50 per cent to needs, 30 per cent to wants and 20 per cent to savings or debt repayments) but it doesn’t work for everyone. Lower-income earners may find it challenging to save that much of their income, while high-income earners may be able to save more.
“Don’t put too much pressure on yourself if your spending needs absorb most of your income” - Jess Irvine, CommBank personal finance expert
Any tips for budgeting an irregular income?
If your income isn’t consistent, there are still plenty of ways to make your money work for you. Track your income over three or six months to get an idea of your peak and lean periods. Then budget around your lowest monthly income. During the peak months when you have more money coming in on payday, set extra savings aside to build an emergency fund. This will help when unexpected expenses arise during the leaner pay periods.
Do you have any advice for someone who feels overwhelmed by all this?
A budget is the easiest way to address that anxious feeling. By keeping track of income and expenses, you’ll have a clear idea of where you stand financially. If you’re struggling to pay your bills, reach out for support. The National Debt Helpline (1800 007 007) can connect you with free financial counsellors who can help you manage your debts and get a better picture of your financial commitments.
