Tips for better money management

Income

Income is any ‘incoming money’ you receive. This can include:

• Direct income: includes your salary or wages, or financial assistance from the government such as pensions or other payments.

• Other types of income: includes dividends paid on shares, interest paid on savings and rent received from an investment property.
   

Expenses

Your outgoing expenditure can be broken down into two categories:

• Non-discretionary expenses. essentials such as rent or home loan repayments, groceries, utility bills, child care, and petrol and other vehicle costs.

• Discretionary expenses. non-essential expenses such as lifestyle spending, including entertainment, sports and recreation, or eating out.
   

Cash flow

Your personal cash flow takes into account all the money flowing in and out of your bank account, including your income and expenses. Having positive cash flow means that your total income is more than your expenses over a set period of time, while negative cash flow occurs when your expenses are greater than your income.
 

Budget

To work out your cash flow, it helps to know how to make a budget.  By tracking your spending against your budget, you can understand how you plan to use your money, and where your money actually goes.
 

Saving

If you have a positive cash flow, you might decide to save your extra money for a goal like booking a holiday, buying a home or even just topping up your emergency fund.
 

Banking

When choosing your bank, look at your needs and financial goals and check if the account you choose matches your needs. Check the bank’s fee schedule and any withdrawal or overdraft fees and charges as well.
 

Investments

An investment is something you buy with the intention of generating an ongoing income or making a profit. The most common types of investments are property, shares, bonds and cash.
 

Interest

There are two types of interest you’ll typically encounter, and it can help to think of interest as a two-way street.

• You’re charged interest when you borrow money. You have to pay back interest to your lender on top of the amount you borrow.

• You receive interest when you deposit money into a savings account or other savings product.
   

Tax

Tax refers to the money deducted from your various income sources by the government. The most common types of taxes include income tax, capital gains tax, and the goods and services tax (GST) which is a tax paid on most purchases.
 

Debt

Debt is money you owe. Your debt includes money you’ve borrowed, and can be a personal loan, home loan or credit card from a bank, or money you’ve borrowed from family or friends. There are two types of debt.

• Bad debt (such as credit card debt) can cost you money without improving your financial position.

• Good debt (such as a home loan) may help you to build wealth and add to your credit history.
   

Credit history

Your credit history is a history of all your current and previous debt, and your repayments. Your credit history is used as a way to keep track of your creditworthiness, and can affect your ability to get a loan, as well as the amount a financial institution will lend to you. Paying bills on time, and not missing loan repayments help you build a good credit rating. Late payments or non-payment can affect your ability to get a loan in the future.
 

Super

Your superannuation, or super, is a fund into which your employer (and potentially you) contributes a portion of your earnings from your working life, to better support you financially once you have retired.

Your super is typically stored with a super fund, where professional fund managers invest your money with the aim of earning a return to grow over time. Super funds typically have higher return rates than interest rates of regular banks.
 

5 tips for good money management

1. Try to keep track of your money

Learning how to budget starts with knowing how much you spend and earn, it’s challenging to get ahead financially if you don’t have a clear picture of what you earn and where it goes.
 

2. Aim to spend less than you earn

Having a positive cash flow each is the first step in being able to get ahead financially. If you find you’re struggling to do this, it could help to look at your budget and consider if there are any expenses you can reduce or any ways you can earn extra income.
 

3. Consider paying off any debt quickly

If you owe money it may help your financial situation if you prioritise paying it off. You could consider starting with the debts that are costing you the most in interest charges, whether from a bank or other financial institution, or consolidating your debt if you owe money to different providers.

In the future, it may be worth considering where you could avoid going into debt, whether it’s through limiting your credit card use, or using your savings when possible.
 

4. Get more out of your savings

If you have some savings already, research how you can make this work better for you. Consider shifting your savings to a high-interest savings account or term deposit, so you can earn more interest on your money over time.
 

5. Plan for the future

When it comes to money, it helps to plan and budget for the future. For instance, buying a car, going on holiday and moving into a new apartment all within a six-month period could be very taxing financially. But if you spread these out over a longer period of time they might be possible.