According to the latest ING Direct Household Financial Wellbeing Index, two in three Australian households are short of cash between pays and one in three need to use credit cards to compensate this gap.

Further, almost half of the households feel that an extra $300 extra would be needed to be financially comfortable. Only 9% of people are satisfied with their take-home salary.

To overcome this cash flow problem, the survey indicated that Australians deal with the shortfall by:

-          staying at home instead of going out

-          cooking cheaper meals

-          using their savings and relying on credit cards until the next payday.

From this study, we realise that savings money can be very difficult and not the priority. However, the need for having savings is crucial as it provides a cash buffer for times when extra cash is needed.

Savings should also be maximised by utilising high interest bank accounts.

Budgeting can be a useful exercise and involves keeping track of your payments on a monthly basis and categorising them into groups such as fixed spending (bills) and discretionary spending (clothes).  After the expenses have been split, you can then decide if all the discretionary expenses are essential.

An alternative to holding cash accounts is to make additional loan repayments in the months when you can. There are facilities such as offset accounts or lines of credit that allow you to make these additional repayments but still have access to your money in case of emergency.

It can be frustrating to be conscious of your credit card usage and not go over the limit and then to make repayments on time however, by doing so, you are saving interest of up to 20%.  In addition, by implementing some basic budgeting practices, you can become more aware of your spending and be in more control of your finances by understanding how much you earn, how much you spend, and how much you should have left over (to save into a bank account or reduce mortgage).