Setting a budget is a lot like starting a new fitness regime.

It requires planning, discipline and perseverance.

Just like you need to burn more calories than you consume in order to lose weight, you need to save more money than you spend in order to maintain a healthy bank balance.

Most Gen Y avoid the unpleasantness and accountability associated with documenting expenses at all costs. Writing down what you spend is not only frightening and shameful but also limits our delightfully innate ability to self-delude.

The sad reality is that you did make a $200 withdrawal last week and it really has all been spent on coffee and food.

The good news is that adopting healthy spending habits is much easier than you think as small lifestyle adjustments can quickly lead to big rewards.

From The Starting Blocks

Many young Australians are now making a lifestyle shift from one of spenders to savers.

Developers have begun to recognise the potential of this burgeoning market by creating countless financial management apps and software to ease the transition and make creating a budget fun and simple.

Where To Train

• Pocketbook – a free Australian budget planner available on iOS and Android.

via Pocketbook

The beauty of this app is that it shows you exactly where your money is being spent by automatically organising expenses into categories such as food, petrol and bills.

As the only personal finance app in Australia that syncs with your bank account, it factors in your income which gives you the ability to set saving goals and decide how much you can safely spend in a given week.

It even sends you notifications of upcoming bills, when you have gone over budget as well as any hidden fees charged to your account.

• ASIC’s MoneySmart budget planner is a fool proof, low-tech alternative to Pocketbook.

via MoneySmart

It allows you to work out where your money is going, add items and save results online.

Its clear, simple and easy-to-use interface is a good option if you are looking to start saving money quickly.

MoneySmart also offer a number of award-winning free apps and personal finance mobile tools such as TrackMyGoals (iOS & Android), TrackMySpend (iOS & Android), Mobile Calculator (iOS & Android) and Money Health Check (iOS & Android)

Download the free budget planner here.

• MoneySoft – available on Mac and PC.

via MoneySoft

Like Pocketbook, Moneysoft organises your expenses into categories, sends you notifications and schedules bill or loan payments by making sure you have enough money to cover upcoming expenses.

You can also set financial goals, such as a holiday, and the software maps out a plan to get you there.

• Xero – available on Mac and PC. An excellent alternative for small business owners if you are looking for something a bit more robust to stay on top of your finances.

via Xero

The software monitors cashflow, invoicing, payments as well as payroll and also comes with a smartphone app.

• Piikki – $4.99 from the App Store. If you are a small business owner, or are simply looking for an easier way to keep your receipts in one place, apps such as Piikki make your life instantly easier by organising and uploading receipts from your smartphone.

via Piikki

You can scan and send receipts directly to your accountant or upload them straight to the cloud. This means that you will never have to remember to keep another receipt again.

It also easily syncs with Evernote, Dropbox and Google Drive to track and organise your expenses.

• Splitwise – available on iOS and Android. A very handy little app that helps you split expenses with friends and track who owes you money.

via Splitwise

Splitwise helps you share bills and IOUs by making sure everyone is paid back.

Perhaps its best feature lies in its ability to determine who should pay what rent in share house situations and at what point a significant other should start contributing towards rent.

• DebtMinder – $1.99 iOS. DebtMinder is a fantastic tool that organises your big debts such as mortgage, loan or bill repayments.

via DebtMinder

It creates a personalised pay-off plan that takes into consideration interest rates and your minimum monthly repayments.

• Commonwealth Bank’s My Wealth service is another way to obtain a picture of your overall wealth. It combines your share account with your everyday bank account and any super funds or loans. The service also offers news likely to impact shares on your ‘Watch List’ and portfolio as well as other learning tools.

If you are based outside Australia, apps such as Mint and Level Money are excellent alternatives.

Ready. Set. Go!

Putting a budget in place is the first step to getting your finances on track. Just like building physical endurance, financial fitness takes time. The most important thing is to make a start and things will become easier.

A few quick strategies you can implement today:

1. Set Goals

Goals make the most daunting task feel worthwhile and achievable.

If your goal is to travel overseas next year, open a high interest savings account and transfer $15 per day until the trip. The amount is so small you probably will not even notice it, but the result will quickly add up to cover the cost of your plane ticket.

This method is simple but effective!

2. Cut down on daily expenses

Most of us place a high value on our morning coffee. As a culturally entrenched way to kick start the work day, network with colleagues or let off steam with friends, buying two or more coffees per day (between $3-$5 for a large flat white) can quickly add up to $75 per week!

Cutting back on coffees and placing this money into a high interest, however, can earn you over $5,000 per year.

Now consider how much you would have for your next holiday if you stopped buying lunches?

Finish Line

These apps, tools and strategies are just some of the quickest and easiest ways you can start to gain control of your finances, set a budget and work towards your dreams.

Think we’ve missed anything? Let us know what strategies you use to stick to your budget in the comments section below!

To achieve a reasonable earning capacity and be a good saver, many maintain the view that you need to study hard at school and achieve a level of professional success in your chosen field.

Researchers are now exploring whether some of us have a genetic advantage when it comes to financial matters – or whether our behaviours and attitudes (often instilled by our parents) ultimately determine if we will form saving or spending habits.

Like A Kid With Marshmallows

To understand whether our saving behaviour is determined by our genes or environmental factors, Stephan Seigal, Associate Professor of Finance and Business Economics at the University of Washington Business School and co-author of The Journal of Political Economy: The Origins Of Savings Behaviour, asks a number of relevant questions.

Siegal explores a study by American psychologist, Walter Mischel, which sought to understand the age patience and self control develops in children. Known as the Stanford Marshmallow Experiment, the study provides children with two options:

1. Eat a marshmallow immediately; or
2. Wait 15 minutes and be rewarded with 2 marshmallows.

Later in life, the children who were able to wait longer for a reward tended to outperform children who ate the marshmallow immediately in a range of important life success measures.  For example, children who exercised patience in the marshmallow experiment achieved better SAT Scores, higher educational achievements and a healthier body mass index.

It makes sense. If you are patient (able to exercise impulse control) and can reconcile the long term consequences of short term behaviour you are more likely to work hard to achieve goals – increasing your chances of a successful, high paying job later in life.  An impatient person is easily frustrated and wants quick results.

If you were given the option of spending $500 today or $1000 in 3 years time, what would you do? The answer will depend on a range of personal circumstances, however, a sensible choice would be to wait and receive $1000 in 3 years which you can then put into a high interest savings account to earn more money.

Although genes play a huge part in who we are, I believe our everyday habits and life experience have the biggest impact on our capacity to save.

The determining factor is you!

Wealth-building is as much a skill as driving a car. To be any good, you need to commit to changing your attitude and behaviour from a spender to a saver.

Here are some ways to get started

Work out your earn-to-burn ratio. Start by working out your earn rate by making a list of your yearly income (salary, dividends etc). Then work out your burn rate by listing your yearly living expenses (including holidays, entertainment, food, rent or mortgage repayments). When your earn rate exceeds your burn rate, you are in a sound financial position to save money.

If, however, your burn rate exceeds your earn rate you may wish to consider:

1. Finding a second source of income (for example, through a second job)
2. Finding ways to cut down your expenses
3. Developing a skill that will attract greater remuneration at your current job
4. Chasing a promotion

Some other effective strategies you can use today are to:

• Set up an automatic savings plan with your bank. This will automatically transfer a predetermined sum from your salary and place it into a high interest savings account. Start with as much as you can afford and increase that amount whenever you can.
• Collect loose change and deposit this into a high interest account. You will be surprised how easily it adds up and makes a big difference.
• When you receive a pay rise at work, try to use the extra money to reduce your debt or to increase your savings. DO NOT fall into the trap of buying new things you do not really need.

In conclusion

All these tips are effective actions that you can take today.

The immense benefits of taking a proactive approach to your savings can free you to pursue things that you love. While the risks of not taking any action can leave you living life bill to bill.

Do you think your capacity to save is influenced by your genes? What everyday strategies do you use to save money? Share your stories in the comments section below!

Further information

For more information on saving habits and genetics, listen here.

In Australia, there are two things that set Gen Y (persons born between 1981 and 2000) apart.

1. They are independent and informed: more than any other generation, access to quality and accurate information on financial matters is never more than a few clicks away.

2. They are forward-thinking and adaptable: imminent changes likely to impact this generation’s future financial security have led young Australians to seek alternative ways to build and retain wealth.

This means that the way Gen Y go about investing money will be vastly different from previous generations.

Here we explore some upcoming government changes to superannuation, the likely impact on young Australians and the smartest investments you can make based on your age and financial situation.

Ch-ch-ch-ch Changes

A serious question that needs to be asked is whether Gen Y will see a cent of its superannuation?

If you think this is radical, insane or just downright silly, recent reports indicate that the government is already starting to make changes – the impact of which will be visible in the not too distant future. Over many years several commentators, including Kris Sayce at Port Phillip Publishing, have been vocal in foreshadowing these developments. You can find some of his work at Money Morning.

Some estimates are that the Australian Super pie currently sits at $2 trillion and that the government currently has a $356 billion debt, growing by around $36 billion every year.

The government has identified abuse of the tax system by some wealthy who have misused super concessions to reduce their tax by channelling money into super that would normally be taxed at the highest marginal rate.

The government is currently gauging public interest in major changes to super, perhaps even a scheme for the nationalisation of superannuation. An example of minimum possible change comes from recent statements by the Treasurer, Joe Hockey, about changing super rules to allow young first home buyers access to their super for a home deposit.

One clear problem for the government is that the very wealthy do not so much take advantage of the tax benefits of super as invest moderately in it. Instead, Australia’s super wealthy place the bulk of their finances into ventures that make big money quickly and that they can use now – not in 20-30 years.  This means that any significant changes to super arrangements will likely leave the lower and middle income earners (the majority of Australians) worse off.

These are the very people who take advantage of the tax benefits of super and who believe it is the best thing for their financial futures.

Turn and face the strain

You can start protecting your hard-earned cash with some simple but effective strategies today.

Be proactive. Prepare for change and invest wisely.

1. Super Contributions

To grow your money quickly, consider only investing the required minimum in your superannuation fund. The tax benefits are not that great and you cannot touch it for 40 years.  This will give you more cash to invest in money-generating products that you can use now!

2. Gold and silver

It is important to diversify your portfolio. As far-fetched as it may sound, one of the best ways to do this is to invest in precious metals.

Most serious and smart investors purchase a percentage of gold and silver to make money but it can also be used as a long term investment strategy. These days, investing in gold or silver is important to protect your financial interests against:

• local economic uncertainty;
• inflation; and
• unstable global economies.

Spend a few weeks saving and buy an ounce of gold or some gold coins. At the end of the day, precious metals are the most reliable asset to have if things go ‘pear-shaped’ economically. When you eventually want or need to cash-up, your gold or silver investment is guaranteed to provide you with a very healthy return.

3. Stock diversification

Investing in the stock market can be a great way to invest but diversification within your stock portfolio is a must.

It is important to remember that whether you are a day trader or a big yield hunter, putting all your eggs in one basket or sector is a sure-fire way to fail on the stock market.

Small Caps

These stocks are high risk, high return. When you hear someone making a fortune on the stock market it is because they picked the right small cap. These stocks can see 100-300% gains on your initial investment but you can just as easily lose all your money.

Bottom line – Only invest what you can afford to lose.

Blue Chip Stocks

These stocks are for large, profitable and national companies.  Blue chip companies have a strong record of stable income and a solid reputation. Generally speaking, the benefit of investing in blue chips stocks is the dividend – investors in these companies are more likely to receive substantial returns on investment in spite of economic fluctuations.

This is why you pay a higher price to acquire these stocks.

Bottom line – Investing in blue chip stock is a long term play that requires a decent chunk of money to get started.

Pretty soon now you’re gonna get older

Stay informed about changes that impact you.

These are just some of the ways you can diversify your portfolio, protect your interests and invest wisely for the future.

In the coming weeks, we will be explore other ways you can invest – such as bonds, starting a business and searching for yields.

Until then, sit down and make a plan. Do your own research and figure out what works for you based on an objective assessment of your financial position.

What are your golden rules for investing? Tell us about your strategies to save and grow your money in the comments section below!

Note: I am not a financial adviser. When it comes to your money, you should always conduct your own research or consult with a financial adviser/planner before making any decision to invest.

Looking for further information?

Before engaging a financial adviser, you should always check their credentials.

The Australian Securities and Investments Commission (ASIC) databases will tell you if the adviser is licensed to sell you certain financial products or provide you with financial advice.

To check if your financial advisor is licensed, contact:

• MoneySmart website; or call ASIC’s Infoline on 1300 300 630 (from inside Australia), or
  phone +61 3 5177 3988 (from outside Australia)

Before investing, it is important to check whether the investment company is operating legally.

To check if an investment company or scheme is operating legally, search:

• ASIC’s MoneySmart database; or call ASIC’s Infoline on 1300 300 630.

To make a complaint, contact ASIC’s complaint service.