Become your own personal accountant – 12WFFC
Welcome to the finder.com.au 12 Week Financial Fitness Challenge – 12WFFC – where you will spend 12 weeks to learn how to take control of your finances and get your money into shape for life.
To make the most of this program, you should aim to complete all of the items on your weekly checklist and read all the material available because as they say, knowledge is power!
You’ll set financial goals and make plans to pay back your debts. Each week you can review your progress and make real changes to improve your financial situation for life.
Step 1: Print out your last three bank statements
The first step to getting on top of your finances is crucial, even if it isn't the most exciting thing to do.
Many Australians live paycheque to paycheque. They spend the majority of their income and then transfer the remainder, if any, into a savings account. These practices make it almost impossible to save effectively or reduce your debts. The simplest way to avoid this trap is by doing the numbers – know how much you have to spend and what you’re spending it on.
Make a list of every bank account, including your loans and credit cards.
Now, make the necessary calls or log onto your online banking portals to get a copy of your statements for the past three months.
If you make a call, you’ll have to request that your bank or credit provider send it to you through the mail, but this could incur a hard copy statement fee which is around $2 per statement. The cheapest way is to log into your account and print it out from there.
To do this, after you’ve logged into your account, go to your transaction history. There should be a button here that says ‘print’. For example, Commonwealth Bank customers can find this button on the bottom right hand corner of their transaction history. Or you might find ‘e-statements’ available to print.
Step 2: Record all your incomings and outgoings by downloading a budgeting tool or app
Once you've gotten your statements together, you'll need a way of recording your weekly, fortnightly or monthly (the choice is yours) income and expenses in one place. This will make it easier for you to get a birdseye view on your financial position.
There are plenty of online and offline budgeting tools out there to help you organise your money - some are automated, some aren't. If they aren't automated you can use your statements to manually put it in your expenditure.
There’s a nifty app called Pocketbook available for anyone with a computer or laptop, or Android and iOS (smart phones and tablets) – you can find this here. It automates and syncs your bank accounts so you can track every dollar you spend in real time.
It also analyses your spending to categorise what you're spending your money on. It won't always get it right, and it does takes sometime to start analysing trends in your spending, so for the purposes of this exercise you might need to help it by looking over it and categorise your expenses manually.
Once you've followed the instructions for setting up your Pocketbook account (you can find this here) and log in, you'll be presented with a list of your recent transactions ordered by date. You can notice from this example that some of the transactions are automatically categorised into sections such as spending money, food etc. There are also a fair number of transactions the app couldn't categorise, so take a few moments to categorise these.
Pocketbook may not suit everyone; so if you’ve found that it isn’t quite suited to your needs, or that it doesn’t offer you the ability to sync accounts from your provider, you can rely on your printed statements or what your bank has provided for you. Banking apps and online portals are also a great way to track your spending, but they may not provide the same "spending limit" feature as Pocketbook.
Be mindful that if you transfer money from your transaction account into another account that you hold, such as savings account, Pocketbook will count that as an expense. So if you regularly transfer money into a high interest savings account or something similar, remember to keep this in mind.
Pocketbook may not suit everyone; so if you’ve found that it isn’t quite suited to your needs, or that it doesn’t offer you the ability to sync accounts from your provider, you can rely on your printed statements or what your bank has provided for you. Banking apps and online portals are also a great way to track your spending, but they may not provide the same ‘spending limit’ feature as Pocketbook.
For example, Commonwealth Bank provides a handy spend tracker on its online portal NetBank for its customers to identify their good and bad spending habits. The great thing about this tool is that it’s automatic, so there’s no need to record your expenditures.
If you’ve gone through the options above and you still haven’t found something you like, then you could use Microsoft Excel, Google+ Spreadsheet, or just using a pen, calculator and paper. Remember to keep all of your documents and handwritten notes in a safe location.
You’ll need to sort your finances out in time periods of weekly, fortnightly and monthly categories like the following;
|Income (after tax)||Weekly||Fortnightly||Monthly|
|Total income (A)|
|Total regular expenses (B)|
|Gifts and presents|
|Tax (if self employed)|
|Total irregular expenses (C)|
|Haircare and bodycare|
|Total everyday expenses (D)|
Then you need calculate your results: income minus all your expenses gives you your 'grand total' or [A - (B+C+D)]. A negative result means you're spending more than you earn and a positive result shows that you're earning more than you're spending - what result did you get?
Step 3: Identify your good and bad spending habits
This step involves identifying where your money actually goes. If you've used an app or other digital method of sorting out your expenses, it's a lot easier to calculate how much you've spent. Let's have a look at the case studies below to see different ways of how you can spot trends in your spending and how you can calculate them.
Case Study 1: Andrew
Andrew has a CommBank account, and CommBank has ever so kindly produced this report of his expenditure. He has transferred almost twice the amount out of his account than he did the previous month. Transfers are not necessarily a bad thing as he could have made this transfer to a high interest savings account. However, you can see that he's taken nearly three times as much cash out than the previous month, showing that he's probably been spending more when he goes out—an area in which he can work on to reduce the amount of his outgoing expenditure.
|Good spending habits|
|Bad spending habits|
Case Study 2: Andrea
Andrea prefers to be a bit old school and likes to handle her finances through Microsoft Excel. Note that if you decide to handwrite all your expenditures it would look similar to this example, except instead of using the calculation functions available on Excel, you'd be putting the numbers into a calculator yourself.
|Good spending habits|
|Bad spending habits|
You've now identified your good and bad spending habits. For some, it'll be confronting, especially if you've worked out how your coffee addiction is costing you $50 a week. The main aim is to identify what you're doing well, and what you need to improve. If you're not doing anything well, don't fear. Week two will see you learn more about your debts so you get a broader understanding of what you can and can't afford to do with your money. You'll also be able to set a spending limit for yourself in the next couple of weeks as you begin to understand what types of debt you have.
By the end of this week you should
- Know where to find your banking statements
- Be able to document your expenses and savings for the past three months using a budgeting tool, either online or offline
- Understand your own spending habits and decide whether they are good or bad
Ask an Expert