Dealing with money issues can sometimes be stressful. If you are struggling to keep on top of your finances, the sooner you act and seek help, the easier it will be to get back on the road to financial security. Understanding how things like credit or mortgages work can stop you from losing out financially and help you gain control of your finances.
Budgeting is a powerful tool that can help you take charge of your financial future. It helps manage your money so you can cover the essentials and have enough left over to save. It can help you understand where your money goes, what you can afford and makes sure debts are paid.
Budgeting can give you peace of mind that you can handle an unexpected expense. If you can find extra savings in your budget, you could pay more off your mortgage, credit cards or other debts.
Services Australia (formerly known as the Department of Human Services) provides information through its Financial Information Service to help you make informed decisions about your finances.
Budgeting tools and tips
There are lots of free budgeting tools and apps available to help you start and stick to a budget. An example is ASIC’s budget planner.
Make sure you’re getting the benefits you’re entitled to
Depending on your circumstances, you may be able to get financial support such as Rent Assistance, Family Tax Benefit or Child Support.
Contact Services Australia to find, estimate and compare payments and services.
Sell things you no longer need or could live without
You could consider selling some things that you no longer need or you could swap for a cheaper alternative – such as downsizing a car that is expensive to run.
Be careful when selling assets – make sure they aren't still under finance (e.g. a car loan). You may not be able to sell these types of assets without paying out the loan first.
Reduce expenses
Consider cutting out or cutting down on discretionary expenses such as eating out, gym memberships, new electronics etc. Try things like buying grocery items in bulk when they are on special, or bringing a reusable cup to your regular coffee shop to receive a discount. These small amounts may add up to make a big difference for you over time.
For more tips see the MoneySmart website Simple Ways to Save Money
Change providers
Changing providers, or even just contacting your existing provider to ask for a better deal, can help make sure you are getting the best value for your money. There are many providers that offer services such as banking, insurance, phone, internet or electricity.
You may be able to make savings by comparing fees and charges and reviewing what’s included in your service. Reviewing your service can make sure you are not paying for services you don't need. This can be especially true if you haven’t looked at your contract for a while.
Access no or low interest loan schemes
You may be eligible to access a low or no interest loan if you are a low-income earner or Centrelink recipient and struggling to access credit from a bank.
For more information, including eligibility details see the National Debt Helpline No and Low Interest Loan Schemes.
Earn additional income
You could consider asking if you are able to do additional paid work with your employer (such as overtime). You might also look at taking on other paid work - for example ride-share driver services, child minding or hospitality, etc.
Set a savings goal
After doing your budget and seeing how much money you can afford to save, you could set a goal to achieve a specific amount. People who set a savings goal and commit to a plan are more likely to achieve them – and once you get started, and saving becomes a habit, it gets easier. You might put money aside for a specific event or purchase, but it’s also a good idea to have some money set aside for emergencies, in case you are unable to work or have an unexpected expense.
For useful tips on how to set and stick to a savings goal including a savings goal calculator, visit Saving on the MoneySmart website.
Unexpected situations such as loss of employment, relationship breakdown or finding yourself unable to work due to an illness or injury can make it difficult to keep on top of your financial commitments.
Building an emergency fund
Having an emergency fund can be a very important step in avoiding significant stress if you experience a loss of income or need to cover urgent and unexpected expenses. If you don't have an emergency fund, and are struggling with making ends meet, talk to your creditors (the people you owe money to). Be honest about your situation and how much you can afford to pay. Often large lenders will have a hardship department that are there to help you.
You can also get help from a free financial counsellor by contacting the National Debt Helpline on 1800 007 007. The National Debt Helpline website also has step by step guides and useful information on specific types of debts, such as housing, tax debt or Centrelink debt.
If you are in a crisis and need access to money fast, there are places you can go to get help. You can search for emergency relief providers in your area by using the Department of Social Services' Grants Service Directory. Choose 'Financial Crisis and Material Aid - Emergency Relief' in the 'Service Type' field.
For more information on support services available, see Where to find help.
There are many loan options on the market and not all of them are made equal. Make sure to read and understand what you're signing up for. Things to look out for include:
- loan minimum repayment
- loan duration (how long you will have to make those repayments for)
- amount of interest you will be required to pay over the life of the loan.
If you're unable to make the minimum repayments on a loan, you may have a default listed on your credit report and it could make it harder to get loans in the future. Understanding the facts can help protect you from making a decision that could cause you financial stress in the future.
You may want to speak with a free, independent financial counsellor before committing to something that you may later regret.
Pay day loans
Pay day loans are short-term loans that are often for small amounts. Be careful though as they often have very high interest rates and penalty fees. These fees can quickly snowball into something much more unmanageable if you can't keep up with the repayments. The MoneySmart website has a Payday loan calculator that can help you work out the true cost of this type of loan.
Rent-to-buy or product rentals
Rent to buy (such as renting household appliances) could seem very attractive if you can't afford to buy the same products brand new. However, people often end up paying more in the long run and may have to pay penalty fees if the item is damaged or you change your mind. The MoneySmart website has a Rent vs buy calculator to help you work out the true cost of renting and other options available.
Interest-free deals
Some retail outlets may offer you an interest-free or buy now, pay later financing on purchases, such as household appliances or furniture. Salespeople can also put extra pressure to commit to these deals and encourage you to take on more credit than you intended. Make sure you fully understand how the repayments work and what the interest rate will be once the interest-free period is over. The interest rates and fees will often be very high, and may end up costing far more than paying for the items on a standard credit card. Find out more about interest-free deals on the MoneySmart website.
Buy now, pay later
Buy now, pay later services offer you the ability to pay for purchases in instalments, while still being able to purchase the product or service. These services are marketed as interest-free, but may have some hidden costs such as account or late penalty fees. It may also be easy to take on more than you can afford and struggle to meet the repayments. Find out more about buy now, pay later services on the MoneySmart website.
Basic money management is about meeting your family’s everyday expenses, handling unexpected bills and saving for the future. It can put you in control of your money, which helps you avoid stress and feel more secure.
Communication in your family plays an important role in managing money well. Honest conversations with your partner, if you have one, can help to avoid conflict about money. And involving children in planning and budgeting can make it easier to achieve savings goals together.
A family budget: why it’s a good idea
A family budget is essential to managing your money.
That’s because a family budget helps you:
- spend your money wisely on the things you must have – these are your needs
- save money for the things you like but can live without – these are your wants
- set aside money for unforeseen expenses – for example, if your car breaks down and needs repairs
- stop accidental overspending.
Working out how much money you need for everyday essentials like food, housing, utilities like gas, electricity, phone and water, transport and medical services can help you make sure you have enough for unexpected expenses and emergencies.
Budgeting can help you and your family take the first step towards control of your money. It can also help you avoid debt. And it lets you get on with enjoying family life, rather than spending too much time worrying about your finances.
Getting started with budgeting
The key to budgeting is sticking to a basic rule – spend less than you earn.
One way to start budgeting is to list what you earn, spend money on and owe. It can help to look at past salary statements, benefit statements, bills, bank statements and credit card statements. If you spend or earn money any other way, be sure to look at this too.
Try to look at enough bills and statements from the past year to understand your usual earning and spending habits. It’s good to look at how some bills are higher at different times of the year. For example, energy bills are often higher during winter because of heating.
After you’ve accounted for essentials and emergencies, your aim is to have money left over to spend on things you want.
Budget planners and savings calculators can help you get on top of your family budget. You can find many simple, free budget planners online.
Working out what you spend: the first step towards managing money
One of the hardest things about making a budget and managing money can be keeping track of what you spend.
Spending can be regular (fixed expenses) or irregular or once-off (variable expenses).
Here are some of the fixed expenses you might want to include in your family’s budget:
- mortgage repayments or rent
- utilities – gas, electricity, water, phone and internet
- council fees and land taxes
- school or tertiary study fees
- health, car and household insurance
- public transport costs
- credit card and personal loan repayments.
Here are some of the variable expenses you might want to include in your family’s budget:
- food
- home maintenance and household goods
- school uniforms, textbooks and stationery
- medical and dental fees
- car repairs and petrol
- personal items like clothing and haircuts
- registration fees and equipment – for example, for sports, music or dance programs
- holidays
- entertainment
- gifts – for example, for birthdays or weddings
- other things like special treats for you and your family.
If your income allows, deliberately overestimating the money you need for bills might help you find extra spending money.
Planning how and what to save: a key part of managing money
Your budget will tell you whether you’re currently spending more or less than you earn. If you’re currently spending more, it can help to sit down together as a family and think about where you can save money. And if you’re already spending less than you earn, you can look at how to save and how to use your savings.
Here are some tips for making a savings plan:
- Review your spending. Figure out whether you’re saving as much as you can. Could you spend less on certain items? Do you have any high-interest credit cards or other loans? Could you pay these off as soon as possible and look into more suitable credit or loan options? It’s a good idea to do this regularly.
- Build a savings buffer. Before you start saving for your wants, it’s really important to keep extra savings for financial emergencies. For example, you could aim to keep some money in a separate savings account for emergencies.
- Decide what you’re saving for. What are your goals? How much do you need to save to achieve them?
- Set a deadline for your goal. Give yourself plenty of time – saving can seem to take forever. But be realistic, and you’ll avoid feeling pressure.
- Open a fee-free bank account, which is separate from your main account. You can use this account only for saving towards your goal. You can set up a direct debit from your main account to regularly transfer a set savings amount.
- Look into other options, like asking your employer to split your salary payment, so some of it goes into your separate savings account.
- Speak to your bank, financial institution or financial adviser if you want more advice.
Once you’ve come up with a savings plan, it’s a good idea to review the pros and cons before you start. This way you’ll know how it’ll affect your family life. If there are parts of your plan you’re unsure about, seek advice or double-check your calculations before you go ahead.
If you’re not confident about managing your money or you need help getting your finances under control, you can use the Australian Government Financial Information Service. This service is free and available to everybody. Or you could look into choosing a private financial adviser.