Christmas is a time for giving and it’s so easy to get caught up in the joys of the festive season and lose track of how much you are spending. Fortunately, there are a few tried and true strategies to manage your money to see you through the silly season into the New Year and keep your savings goals in sight.
A budget helps you manage your day-to-day expenses and should also have some allowance for your festive spending, while making sure it’s not at the expense of your long-term financial goals.
One of the best ways to strengthen your willpower is to have a strong sense of what you are saving for. Whether it is saving for a home deposit so you can move into your own home, getting the loan down for the reno you’ve been planning, stashing money away for a rainy day or planning that trip to Paris, it’s important to have a clear idea of not just what you are saving for but what your end goal represents to you. Keep your eye on the prize and your emotional attachment to that prize – so you can manage your festive spending.
Money in… money out
Ok, so now we have established why you are budgeting let’s look at the how.
One of the fundamentals of budgeting is looking at how much you have coming in, and how much you spend. The difference between these two figures will dictate whether you are heading into debt or socking it away.
Then once you have a sense of what you are working with, it’s time to decide which approach you want to take to budgeting and there are a few tried and true methods you might want to consider.
The envelope budget
This budget method involves putting specific amounts of your money into envelopes (physically with cash which is known on TikTok as “cash stuffing”, or electronically with an app or spreadsheet) for different budget categories. Once you have spent the funds in an envelope, you can no longer spend within that budget category until next month. If you have remaining funds at the end of the month you can roll over the funds into the next month’s envelopes or put the remaining funds into savings.
Whether you separate your money into physical envelopes or online in separate bank accounts, dividing up your cash into categories encourages you to be more mindful of where your money is going, giving you the confidence of knowing exactly where you stand any point in time. This method will help you allocate funds for all your necessary expenses as well as the amount you allocate for your festive spending, keeping them separate so you don’t overspend.
The 50/30/20 budget
In the 50/30/20 budget, 50% of your net income should go to your needs, 30% should go to wants and 20% should go to your savings. Your needs are the things you can’t do without, (like rent and your bills), your wants are the more discretionary things you want to do like going out to celebrate the festive season with friends and buying gifts. If you stick to this plan, the final 20% of your income is dedicated to savings.
This method ensures you don’t feel too deprived as you still have some cash to spend on enjoying yourself and the joys of the festive season, but it also helps to provide some discipline to save.
Pay yourself first
If you want to keep it really simple, try the “pay yourself first” method which involves transferring a pre-determined amount into savings at the beginning of the month. After you pay yourself, you should pay your bills, then use the rest however you please. This is a ‘no frills’ budget that’s easy to do and prioritises your savings ahead of any spending which is a good thing to do at a time of year when spending can get out of control.
Whatever method you choose it’s important to take your budgeting beyond Christmas. It takes time to develop habits around money so make sure to commit to whatever method works best for you and keep your end goal in sight. It will be worth it!
We’d love to help you have control over your finances. Give us a call at 08 82314709 or send us an email at info@centrawealth.com.au.
