If your finances have gotten a little out of shape lately, that’s totally understandable. It’s been a bumpy ride. To get things back in balance and back on track, we’ve got three tips to help you start saving again, shed some extra debt and get back to living life the way you want to.
Domino your debts
Once you’ve sat down and done the sums, the idea of paying off all your debt at once can feel overwhelming – but you don’t have to. You could make debt-crushing manageable by taking it step by step.
Start with your smallest debt first. Why? It’s all about momentum. If you crush those little debts first and you could find yourself in a better place to take on the bigger ones. For example, start with things like credit card balances before looking at the bigger obligations, like personal loans or car finance. Before you know it, you could be freed from multiple debts month on month – and you might even find yourself paying extra contributions to your mortgage.
While there’s a theory that the best way to get out of debt is to take on the biggest (and highest interest) debts first, we are psychological beings. Some of us might find that tackling the easier targets first can give us the stimulation and sense of achievement and progress we need to see debt reduction through.
Simplify your budget with the 50/30/20 method
American politics has given us a lot – too much? – lately, but one of the more positive stories to come out of the US is one about a certain senator and her budget management technique.
Senator Elizabeth Warren, a former law professor and long-time Democrat, popularised a budgeting method as far back as 2005 in her book All Your Worth: The Ultimate Lifetime Money Plan – and it couldn’t be easier. We’re not all spreadsheet people, that’s for sure, so with this method all you need to do is to remember three simple numbers: 50, 30 and 20.
Allow yourself to spend 50 per cent on your needs – things like housing, bills, groceries and health. Allocate 30 per cent to wants, the optional and fun things you like to splurge on, like nights out, holidays away or new clothes. Then put 20 per cent towards savings – for future goals, an emergency fund or extra debt repayments.
No spreadsheets means less paperwork and no need to track every single expense. Simply stick to the percentage rules and that’s it. Plus, you can modify the percentages a little to suit what works for you.
Pick one thing to cut
When was the last time you took a look at your bank statement and added up what all those subscriptions are costing you? And not just in a month – how about across the year?
This technique is all about taking a step to cut out one thing (or more, if you want) that isn’t giving you anything in return right now. Take a look at all the expenses that are sneakily eating away at your budget. Are they all necessary? We’re talking things like rarely used gym memberships. Splashing out on food deliveries every day instead of turning on the stove. Even buying books from a bookshop or online when you could borrow the same ones from your local library. If any of these expenses isn’t a must and doesn’t give you some kind of benefit, it’s time to drop the financial baggage it’s weighing you down with and start travelling lighter.
Tip: don’t just look at the monthly amount you might save if you axe an expense. Add up how much it might save you across the year. You might be in for some bill shock (but in a really good way).
Looking for extra support?
If you feel like you need advice or a helping hand to smooth out the budget bumps, here are some resources .
Tools, tips and guidance to help Australians take control of their money
Online at moneysmart.gov.au
Financial Counselling Australia
Talk to a financial counsellor from anywhere in Australia
1800 007 007 or online at financialcounsellingaustralia.org.au
National Debt Helpline
Free advice and guides on how to tackle most debts
Call 1800 007 007 or online at ndh.org.au
ING is not affiliated with third parties mentioned in this article. ING is not responsible for any services provided by third parties nor does ING accept any liability or responsibility arising in any way from any products or services supplied by the third parties.
The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Deposit products, savings products, credit card and home loan products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. Living Super, a sub-plan of OneSuper ABN 43 905 581 638 is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. ING Insurance is issued by Auto & General Insurance Company Limited (AGIC) ABN 42 111 586 353 AFSL Licence No 285571 as insurer. It is distributed by Auto & General Services Pty Ltd (AGS) ABN 61 003 617 909 AFSL 241411 and by ING as an Authorised Representative AR 1247634 of AGS. All applications for credit are subject to ING's credit approval criteria, and fees and charges apply. You should consider the relevant Product Disclosure Statement, Terms and Conditions, Fees and Limits Schedule, Financial Services Guide, Key Facts Sheet and Credit Guide available at ing.com.au when deciding whether to acquire, or to continue to hold, a product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms https://www.ing.com.au/pdf/Social_Media_User_Terms.pdf.