Savings and budgeting: getting started
By setting goals, planning ahead and being smart with your savings and debt strategies – you can actively grow your wealth even from a modest start.
Start by setting your short, medium and long term goals.
Be specific and add in realistic timeframes.
Avoid the common debt traps.
Your financial adviser can help you develop a budget and establish an effective savings plan to suit you.
Financial goals can generally be divided into three broad categories:
Timeframe Number of years Goals
Short-term 0-2 years A new car or your next holiday
Medium-term 2-5 years An extended overseas trip or a mortgage deposit
Long-term 5 years or more Major home renovations or retirement
It helps to write down what you want to achieve over each of these periods. Defining your goals will give you a clearer direction and help you make savings and investment decisions with confidence. It’s important to set a specific deadline for each goal. This focuses your mind as well as your savings strategy.
To determine your deadlines, you will need to know:
what your goals are
what you’ve already saved
what is a realistic timeframe to reach your goals.
Once your goals are clear, the next step is to work out how much you need to save to reach them. This means developing a budget.
How to budget
Most of us have great intentions when it comes to saving, but somehow we never seem to get around to making things happen. Unfortunately, unless you have the discipline to put together the numbers, you’re unlikely to make much headway.
One of the first steps towards reaching any financial goal is to establish a budget. Once your budget is complete, you should have all the information you need to create a savings plan to reach your goals.
Understand your financial position. This involves comparing what you own (your assets) with what you owe (your liabilities or debts). The balance will give you your net worth.
Total assets – Total liabilities = Net worth
See examples of each below:
Assets Liabilities Liabilities
Home Home mortgage
Savings accounts Personal loans
Managed funds and shares Credit cards
Prepare a budget by writing down your income and expenditure. This will give you a picture of your spending patterns and can help you identify areas where you can cut back your spending and use that money to reduce debt.
Once you have successfully paid off your debts, don’t stop there, consider starting a savings plan. A popular way to do this is setting up a regular automatic transfer with a pre-determined amount. This is often described as ‘paying yourself first’.