One big mistake people often make when budgeting for their personal expenses is spending up big when a increase in payment comes along. Expecting a pay rise? Perhaps you have a bonus coming up, a large tax return on the horizon or you’re about to increase your income with a second job… A valuable piece of budgeting advice that everyone (no matter their income) should consider, is when you’re expecting extra income, not to spend it before it arrives – instead, consider putting some away.
It sounds obvious. But it’s a trap that often sees people spend money before they receive it. “Great, I have a pay rise coming up, I’ll subscribe to that magazine, treat myself to take-away dinner each week or perhaps take out a loan for a new dining setting” – It’s all too common and it often ensures that people stay behind in their personal finances, because instead of saving their extra cash, they decide to spend it on something they desperately ‘need’.
So our valuable budgeting advice this week is… If you’re expecting an influx of cash, or some regular increase in income, save it! If you lived without it beforehand, you’ll be better off living within your current budget and keeping some money stored for a rainy day, an exciting holiday or a house deposit.
If your wage is about to increase, consider setting up a periodic payment on your internet banking into a savings account and continue living off your current net amount. If you’re expecting a lump sum, put it into a savings account and accumulate some interest.
We always seem to justify these ‘increase in income spendings’ with some “I earned it” philosophy or “I need it” perspective but it’s important to determine whether or not we should be really spending that extra cash.
A savings account separate from your everyday account is imperative as it can earn you interest, it allows you to keep track of how much you’re saving and, importantly it helps to prevent over-spending as one might do if they keep all their funds in one account.
Want to know more about Sort My Money’s personal budgeting service? Sort My Money charge the lowest fees of any personal budgeting company in Australia, have no lock in contracts and provide an award-winning service that helps clients achieve their financial goals. Take the hassle out of personal budgeting by letting the experts do it for you. With valuable budgeting advice and money-saving tips, the team at Sort My Money are with you every step of the way. Contact us to inquire about a consultation.