Making Your Money Work

What if you're not saving any money, not saving enough or unexpected events throw your finances into disarray? Budgeting and being prepared for unexpected events can change things for the better, often without too much pain.

Budgeting: what you need, and what you want

The best tool for finding extra money is a budget, much like Nat and Sam's record of income and expenses. Look at the things you need - the essentials, such as housing and food - and those you simply like to have, or want. When you need to trim the budget, cut back on the 'wants' first - things that aren't essential for everyday life. Don't cut out all the wants, because if your budget's too tight, it's not going to work.

How can you save more?

The best way to save is to put money away as soon as you are paid and before you spend.

Savings tips

What you can do	Potential savings	How it could work
Have and easy access cash account for everyday needs, with a debit card attached	Reduces needs to use credit card; earns interest	Get your pay deposited into this account
Save or invest a fixed amount of money every pay in a separate account	More for your future goals, and an emergency source of money	Get your employer to pay direct to your account or have a fund manager direct debit your bank account
Save your pay rises, bonuses, special payments or tax refund	Savings build up significantly over time as you continue to live within your existing budget	Increase your automatic savings amount. Immediately invest your extra money
Pay your mortgage fortnightly, and pay an extra 5-10% extra on your mortgage every month	Saves interest costs and pays off your mortgage sooner	Get your lender to deduct your mortgage and extra payments fortnightly
Budget a specific amount for fun, leisure & personal expenses	Controls impulse buying	Makes it easier to stick to your budget
Put your change into a savings jar at the end of each day	Creates a little pot of ready cash	Use this money for small personal expenses
Make extra superannuation contributions	More money for retirement and less personal income tax paid	Discuss with your pay office, but make sure that you can afford to make extra contributions

Tips for cutting costs

Ways to cut costs	Potential savings
Pay by cash or EFTPOS instead of using credit	Encourages saving because you use your own money (which is limited) instead of borrowing it. Saves interest on credit cards
Pay credit cards off in full each month	Saves 16% per year on your outstanding balance
Use lay-by for Christmas shopping or save small amounts over the year	$25 per week would mean $1,300 in Christmas cash, avoiding high credit card bills in the New Year and interest payments
Combine multiple accounts, such as cheque and savings accounts at the bank, and separate superannuation funds	Saves fees and charges
Use internet or phone banking	May save bank fees
Take your own lunch to work	If you save $4 per day, that's $1,000 a year
Save for your next car and choose a lower-priced model	A big deposit reduces the total purchase price, and you may also get savings on borrowing and insurance costs
Use pre-paid cards for your children's mobile phones	Make your kids top up the card themselves if they spend too fast
Use self-catering holiday accommodation	Saves on eating out at cafés, hotels and restaurants

What if you can't pay your bills?

Stay calm and work out what you can reasonably pay each person to whom you owe money (your creditors), considering both your living costs, rent or mortgage, and all your debts. Not-for-profit financial counselors can help you.

Contact your creditors promptly and tell them you are having financial difficulties and want to discuss repayment arrangements. This is especially important if creditors hold security over your home, car or other assets. Offer only what you can reasonably afford to pay, and offer something to each creditor. Try to cover interest or charges applying to the debt. Ask if the creditor will agree to reduce the interest on the debt until you can get back on your feet. Confirm any agreement in writing.

What if a family member gets retrenched? Before your family member makes any decisions, takes any money or signs any documents, find out the legal entitlements and the best way for your family to deal with any money received. Centrelink's Financial Information Service conducts seminars on retrenchment and financial issues and can offer face-to-face interviews so your family member can find out about all of the options.

It's always sensible to ask someone who understands the terms of employment and the superannuation benefits, how much tax needs to be paid and what makes the best sense financially. If your family member belongs to a union, they may be able to get free advice.

What if you get a windfall?

Above all, go back to your personal goals. Consider paying off all personal debts first and then your home mortgage. If there's still money left over, consider making a personal contribution to superannuation, a contribution to your spouse's superannuation or starting to invest. Windfalls can easily disappear through unplanned spending or hasty investments. For large sums of money, you may need the help of a financial adviser.

More information? Download FIDO's budget planner from www.fido.gov.au.

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