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How to spend, and still have money leftover at the end of the month

Kaili Ding

Tue Aug 09 2011

piggy bank

IT’S the end of the month, and you’re living off a diet of instant noodles because you’ve splurged on everything else but the necessities. Sounds familiar? Meld finance reporter Kaili Ding offers a few tips on how you can take stock of your dollars and cents – without giving up all of life’s little luxuries.

Have a plan

Like everything else in life, the first step to good money management is to plan ahead. Factors to consider include whether you receive a monthly allowance or a lump sum from your parents, and if you need (or want) to supplement that with income from part-time work.

An important question to yourself is what you intend to spend your money on besides the everyday necessities. Whether your intention is to buy a Prada bag or other big ticket items, or to save for a future investment – once your mind is set on a target, it will be easier for you to work towards that goal.

Learn to budget

To reach that goal, you will have to learn to budget, which serves the purpose of recording your income and expenses. Keeping a budget will help you keep track of what you are spending your money on, and make decisions about areas you may want to cut back on your spending.

And thanks to technology, we have a whole suit of tools to choose from to make budgeting easier. There are budget planners you can download onto your computer – spreadsheets that have been set up with columns for income and expenditure, and all you have to do is to fill in the numbers – like this spreadsheet from The Australian Securities and Investments Commission.

There are also online budget planners from financial institutions like Commonwealth BankNAB and Westpac.

If you like to keep track of your spending on the go, you may want to consider downloading budget planner apps onto your phones. Most apps are capable of tracking your spending and presenting it in the form of a chart, as well as allow you to take a picture of your receipt for reference at a later time (say goodbye to bulky wallets stashed full of receipts). Free apps we’ve come across include Fresh Xpense Capture for iPhone users, Easy money for those using Android, and Expensify which is compatible with most smartphones.

However, if you’re the tactile sort and prefer good old paper and pen, you can just record your outgoings in a spending diary. A simple notebook with columns tracking your daily expenditure and saving patterns will suffice.

Ask for advice

Most students don’t think about asking for advice when it comes to managing their money, but most banks do offer free financial advice where you (or your parents) can sit down and discuss your options with a financial planner. It may be especially worthwhile if your parents have left you to manage a lump sum for the year, and you are looking for some safe investment opportunities.

Deepak Mehra, a financial planner at Commonwealth Bank, says it is important for students to seek professional advice before committing to any investment products.

“The best way is to seek advice from a professional. As there are different ways to invest, some which may not occur to students, and there are also other investment options that offer better returns than the term deposit. The most important thing is to talk to someone so that they can make a plan which tailors to (their) needs,” Mr Mehra said.

Do your research

But most importantly, remember to do your own research so you know what you are getting yourself into. Financial planners will offer you products and packages from the banks they represent, and it would be wise to read up and compare between financial institutions.

You will also do well to remember the first principals of financial management, and that is, the higher the risk the better the return. Don’t just jump into something because it promises a high return. A critical analysis of the features of the product you are thinking of investing in is highly recommended. Think about the risks, if you can afford the risks, and take it to your parents and see what they think.