As we look towards the future, many Australians are feeling the pinch of the rising cost of living. With 2025 on the horizon, it’s never been more important to take control of your finances. Whether you’re a seasoned saver or a budgeting beginner, the new year offers a fresh opportunity to set yourself on the path to financial freedom.
A recent study by the Australian Securities and Investments Commission’s (ASIC) MoneySmart and YouGov has highlighted the financial stress that’s weighing heavily on the younger generation. An astounding 77 per cent of Gen Z men and 87 per cent of Gen Z women reported severe stress over the cost of living. Furthermore, nearly half of Gen Z women and over a third of Gen Z men admitted they were at a loss on where to begin with their financial knowledge.
Gemma Mitchell, a wealth coach and former financial adviser, emphasises that budgeting isn’t about restriction but about balance. ‘It’s about making sure you can fit it all in,’ she says. This includes the fun stuff, too. After all, what’s life without a little enjoyment?
If you’re new to budgeting or have never tracked your spending, fear not. Starting is simpler than you might think. Mitchell suggests beginning with the basics: jot down your expenses on a piece of paper or a notes app on your phone. This could be as simple as recording how much you spent on your last supermarket trip. Over a month, this habit will give you a clear picture of your regular expenses, which is the foundation of any good budget.
Don’t forget to plan for those irregular expenses, such as car registration and insurance. A practical approach is to use sinking funds. Divide the annual cost by 12 and save that amount each month. For instance, if your registration and insurance cost $2,400 annually, aim to save $200 monthly. This way, when the bill comes, you’re prepared, not panicked.
Once you’ve got a grasp on your outgoings, compare them to your income. Over time, you’ll be able to ensure your money aligns with your values and lifestyle goals. The ultimate aim, according to Mitchell, is to reach a point where you no longer need to track every cent because your spending habits naturally reflect your priorities.
While percentage-based budgets like Scott Pape’s ‘Barefoot Investor’ strategy or the 50/30/20 system are popular, they’re not one-size-fits-all solutions. Financial educator Natasha Janssens advises treating these as guidelines and adjusting them to fit your unique circumstances. For example, if you’re a high-income earner, these models might encourage unnecessary spending, while those with lower incomes might struggle to cover essentials.
Janssens advocates for an automated budgeting system that only requires about 15 minutes of your time each month. This involves setting up three bank accounts: one for bills, one for savings, and one for spending. By automating bill payments and savings transfers, you can ensure your essentials are covered without the need for constant vigilance. The spending account then becomes your discretionary fund, encouraging you to be mindful of your purchases.
The beauty of this system is its simplicity and the way it teaches you to balance your spending with your savings goals. If you indulge one week, you might need to tighten your belt the next. It’s all about finding that equilibrium.
Remember, there’s no need to overhaul your finances overnight. Start with small, manageable changes and find what works best for you. Whether it’s a traditional budget, an automated system, or a combination of both, the key is to take that first step.
As we look ahead to 2025 and beyond, financial literacy and freedom are key. What budgeting tips or strategies have worked for you? Feel free to share your experiences in the comments below – let’s support each other in reaching our financial goals!
Also read: What big figure savings could you make?
