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Budgeting basics

Published on 22 Feb 2022

What are the budgeting basics?

A budget puts you in control of your money because you understand exactly what money you have and where it goes.

Creating and sticking to a budget means you actively manage your day-to-day cash flow and your savings for the future. So, where to start?

Make the time

‘Successful budgeting requires time to really think through the money you have coming in, and how you spend it,’ explains our Member Solutions manager, Brian Coombe.

‘It’s helpful to have a place to record your income and expenses. There are plenty of budget templates and apps on the web that can help, find one that works for you.’

Five steps to create a budget

  1. List how much money you receive, where it’s from and when it comes in. This will include any wages, salary, pension, government benefits and investment income.
  2. List all your expenses such as bills (gas, electricity, phone), rent or mortgage costs, food, transport costs, debt repayments, medical expenses and school costs.
  3. Compare your income and expenses. You can save or spend any money left after you have paid expenses from your income.
  4. Set one or more financial goals so you can organise your budget to meet your goal.
  5. Analyse and adjust what you spend and ask yourself are you happy with where your money goes? Can you adjust your budget to meet your financial goals faster?

Tips for success

After helping people with their finances for many years, Brian knows what it takes to budget successfully. Here are some of his tips:

  • Identify your financial goals. Review your budget so you can achieve them.
  • Set a limit on how much you spend, then you can put aside the extra to save.
  • Understand how much need each day or week for essential services such as electricity, gas and phone. Check your recent bills for the daily cost or work it out yourself by dividing the total bill amount by the number of days covered.
  • Check to see if you can get a better deal on your gas, phone and electricity services with another provider.
  • Would it be easier to pay your annual bills (such as rates, car registration and insurances) monthly? Talk to your provider to arrange smaller, more regular payments that suit you.
  • Set up separate bank accounts for different expenses. For example, an account for bills, such as gas, electricity and phone, one for mortgage or rent, another for car expenses and don’t forget an account for savings and rewards.
  • When your money comes in, pay your expenses first then set aside a little more than you need, so you build up a financial buffer to cover unexpected expenses.
  • Investigate and use on-line banking tools which are easy and secure way to pay many bills.
  • Don’t forget the long term and your superannuation. The more you can put in to super now, the more you will have in retirement. Consider small, additional contributions to your super and investigate tax concessions available on pre-tax contributions, such as salary sacrifice.

Make your budget a routine

‘Once you get going and have budget routine, it takes less time to budget as you are more familiar with your income and expenses,’ said Brian.

‘Allocating 5-10 minutes a week might be all it takes to make a difference and put you in control of your finances.’

There are many resources online to help you prepare a budget. Moneysmart – how to do a budget is a useful place to begin.