Investing on a budget – how to make the most of your money on a low or fixed income

Over the last few years many Australians have found that making ends meet has become more difficult as the effects of the Global Financial Crisis hit investment markets and costs of living has increased. This has meant that for many Australians, the ability to save has been challenging.

investing on a budget, investment, budget, GFC, Australia

Over the last few years many Australians have found that making ends meet has become more difficult as the effects of the Global Financial Crisis hit investment markets and costs of living has increased. This has meant that for many Australians, the ability to save has been challenging.

What hasn’t changed over recent years is the process of determining the best way to save, whether it’s putting money away into a bank account, contributing to superannuation or paying off debt. Yes, that’s right - paying off debt, especially debt on an asset that has potential to grow in value is a form of saving.

The first thing to do, whether you earn a high or low income, is to work out your budget as accurately as possible. This is the only true way to gain an understanding of where your money is going and which potential cutbacks and savings, if any, can be made. Whilst it may not be the most exciting exercise it will reveal which surplus funds you have to potentially put away or ‘save’. To get an accurate picture of your situation you may need to keep your receipts and/or note your costs over a period of time, say monthly or, better still,  over a whole year. Annual receipts will also show semi-regular costs such as car registration or ‘one offs’ such as home maintenance jobs.

Another important part of this process is to look at your current situation; do you have debts you need to repay? Do you have short- or long-term goals for which you will need to save? This should tell you how much is required and by when you can hope to achieve your goals. There are a number of financial calculators available online, including those for budgets and for saving. NICRI has useful calculators such as these available as part of its free service. You can access these in the ‘moneymap’ area of the NICRI website www.nicri.org.au.

Now that you’ve determined how much you can put away, you need to consider where those savings will go. If you have existing loans you can consider making extra repayments, which can reduce your interest charges. However, you will need to check to ensure you will not be penalised for making these extra payments. Generally speaking, penalties only apply to fixed rate loans, so be sure to check with your provider. This course of action allows you to own the asset you are paying off sooner and free up more disposable income earlier. If you are not paying off debt, you can consider putting it aside into a savings account, managed fund or superannuation. Try to put savings aside on a regular basis as this reduces the risk of spending this money, and you learn to live without those funds much more easily.

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    COMMENTS

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    susannah
    28th Feb 2012
    11:28pm
    I have recently inhereted a sum of $4000.00 I also still work part time and this reduces a joint pension by $100.00 per fortnight.
    I have limited assests. Will the inheritance affeccct my pension. AS I would like to invest it for a whi2lw.
    Eliza R
    26th Mar 2012
    5:31pm
    Saving money becomes very important in times like this. One of the common ways to save money is to make some investments. When you invest money in company stock, commodities, futures and other venues, the expectation is that you will enjoy sensible return on your cash, perhaps even high returns. However, investment fees can creep in and eat away at the gains. Pay attention, and you can learn the way to save money on investing charges. Find out more her: How to save money on investing fees.