How to do a budget

Budgeting can change your life. Having a plan for your money will help you get what you want and leave you feeling less stressed and much happier.

In this section, we show you how to prepare and use a budget.

Why you need a budget

There are many reasons why you should prepare a budget. You might want to gain control of your money, pay off your debts, save for the next big bill or go on a dream holiday to South America.

Case study: Bec and Steve agree to budget

Bec and Steve often argued in the supermarket because Steve always wanted to buy extra things and Bec wanted to stick to their shopping list. To prevent any more arguments, they created a budget to work out how much they could afford to spend each week and they set aside $10 for extras. After this, trips to the supermarket became easier as they both knew how much they could spend.

To budget successfully, you need a reason to save. It will be easier to stick to your budget if you know it will help you fullfil your goal.

Preparing your budget

Use our budget planner and plan how you want to spend your money over a certain time period. Budgets can be prepared for different time periods – a week, a month or a year.

It’s a good idea to plan for a whole year. Account for regular payments such as your rent or home loan and car. Include in your budget all the money that you receive or are paid over the time period. This could include your pay from your full-time job and any casual work, your pension, government benefits, and any money on investments.

Think about those things that are essential and those that are extras. Use your bank statement or receipts in your wallet to be more accurate.

Case study: Alex’s rate bill strategy

Alex knows she has to pay rates of about $300 every quarter. To plan for these payments, she sets aside $100 a month into a special bank account called ‘bills’. This way she is prepared when the bill is due and can use the money she has put aside.

Using your budget

Print your completed budget planner and keep it somewhere safe. Before you go to the supermarket or other shops, check your budget to see how much you can spend and then stick to it. You may even want to take a calculator with you, or use the one on your mobile phone. It might make shopping longer but you will know exactly how much you can spend.

If you are trying to save money, look at your budget and find ways to cut back on the extras. Try and budget a specific amount for fun, leisure and personal expenses but don’t make your budget too tight because you probably won’t stick to it. Use the savings plan to keep you focused on your goals.

You should redo your budget every 3 to 6 months to make sure it reflects your income, your spending and what you want to achieve. Once you are comfortable with using and sticking to a budget, you can update it less frequently, like once a year. It’s also a good idea to refresh your budget when there are significant changes to your income or expenses, like getting a new job, selling your car, expanding your family or buying a house.

If you have money left over (a surplus)

Smart tip

The best way to save is to put money into a separate savings account as soon as you’re paid and before you get the chance to spend it.

There are a lot of things you can do with any spare cash, including:

  • Opening a high interest savings account
  • Investing
  • Think about making super contributions

When you receive a pay rise, bonus, special payment or a tax refund put the money straight into your savings account or superannuation to give it a real boost. For more information see getting a windfall.

If you’re spending more than you earn (a deficit)

Don’t panic. Check your budget to make sure you’ve got all the amounts right and look at your expenses to see if there are any you could reduce. They are free and can help you take control of your money.

Getting help with your budget

If this is the first time you are doing a budget or if you have a very low income, sticking to a budget can be pretty tough. The first budget is the hardest but it will get easier each time. There are also people who can help you with budgeting such as financial counsellors.

Budget and monitoring services

Beware of budget plans sold by high-pressure selling. You could end up paying $5,000 or more for a ‘budget’ and a ‘monitoring service’ that the salespeople claim will help you pay off your loans faster. Unfortunately, these budgets can be totally unrealistic and involve all sorts of sacrifices that no-one could live with. The ‘monitoring service’ may also be a waste of money.

The best way to do a budget is to have a go yourself. If you can, get help from a trusted friend who is good with money.

Budgeting is a skill and the more practice you have, the better you will become at it. It will help get your money under control so you can save for your goals. Get started now by using a budget planner.