If your finances are still recovering from the excesses of Christmas and New Year, now could be the perfect time to consider revamping your budgeting approach.
After all, providing for a family in Australia requires some significant finances. According to the Australian Bureau of Statistics (ABS), during the 2009–10 period Australian households spent an average of $1,236 per week on goods and services1, and those with their eldest child aged between 5 and 14 spent an average of around $1,670.
When it comes to the costs contributing to these spending patterns, housing costs proved to be the largest, claiming 18 per cent of total spending . This was followed by food and beverages (17 per cent), transport (16 per cent) and recreation (13 per cent).
Further research from the Australian Institute of Family Studies (AIFS) found that families spent the most on housing, power, clothing, food, health, transport, recreation, personal care and income tax.2
The report also stated that financial stress could contribute to conflict within the family as well as affecting the family’s general wellbeing.
It’s clear that many families in Australia face significant costs in providing for each member, but careful budgeting can reduce the risk of over-spending or going into debt and potentially allow for some savings.
Making the most of your finances
If you need to rein in your spending and reach a financial goal, one of the best ways to do so is by creating (and sticking to) a household budget.
MoneySmart, the consumer information resource run by the Australian Securities & Investments Commission (ASIC), has several tips for Australians looking to manage their finances more effectively.
You can create your own or use online templates to give you an idea of the framework. MoneySmart recommends looking at what you earn and other sources of income, and assessing what these funds go towards.
You can base your budget on whatever time period suits you the most, whether that’s weekly, fortnightly, monthly or even longer. Perhaps think about budgeting in line with when your income is paid. The important thing is to account for everything you might spend money on, from eating out and entertainment to regular bills and payments.
Give yourself a realistic amount of financial wiggle room for each of these categories, as this is the key to ensuring you can stick to your budget.
If you have debt, like a credit card debt, try and pay off more than your minimum monthly payment and pay down your debt. This will help you save on interest, but will also increase your available credit for use in an emergency.
If you don’t have any debt to pay off, think about putting some money in a separate account as savings. This will help you manage any large unexpected expenses or could even be used for a special treat, like a holiday.
Use cash. Each week take out the money you have allocated yourself for spending. Having the cash will ensure that you keep track of just how much is left to spend.
Another way you can help set yourself up for financial success is to consider income protection insurance. This type of cover gives you a monthly benefit to replace your income in the event you are unable to work due to illness or injury for an extended period of time.
This can go a long way to helping you feel financially secure, even when you’re unable to work. Depending on the terms of your policy, you can also choose to add optional rehabilitation benefits to your cover to aid the recovery process.
There are a variety of different products available, so you may wish to compare policies to determine the most suitable option for you.
Taking advantage of savings opportunities
As well as creating a budget, you can also make small changes to save on things like electricity, food and water.
Turning off any lights or unused appliances before you leave home, taking shorter showers when possible and being savvy about finding the specials and discounts during your food shopping trips can all help to build up your savings over time.
- Spending patterns of couple families, Australian Bureau of Statistics
- Diversity and Change in Australian Familes – Spending, Australian Institute of Family Studies
These articles are provided as reference material to allow more informed decision making, but are not intended as being a complete source of information on any topic. All readers should make their own independent analysis on the topic to make sure they have considered the aspects that are important to them.