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Getting your budget sorted in five easy steps

Sorting out your budget doesn't have to be a drag, nor does sticking to it need to be feel like a chore.

5 minute read

What’s in this article:

  • Working out your income
  • Listing your expenses
  • Finding ways to make savings
  • Making a start with saving
  • Keeping track of your progress 

What's the benefit of setting up a budget? That's simple - a good budget will not only make sure you've got enough money to cover all your expenses (including some money for fun), it can also help you save money on a regular basis as well.

Setting up a budget doesn't have to be a hassle - just follow these simple steps and you'll be on your way to kicking your own financial goals. 

Step 1 - Work out what money you have coming in

First up, write down what your take home pay is. If you get paid regularly, just take a look at your payslip or bank statement if this is how your employer pays you. If you work for yourself or have an irregular income, the simplest way to work out your weekly income is to look at your last tax return and divide it by 52 (or by 12 if you want to work out your monthly income). Alternatively, if you are a business, you can look at your quarterly Business Activity Statement (BAS) and divide it by 13 or 3.

Step 2 - Work out your expenses

Once you know what money you have coming in, the next step is to work out your living expenses. Your bank statements will come in handy here again too; but if you use your credit card regularly then take a look at those statements as well.

Some of your expenses are likely to be regular fortnightly or monthly expenses, such as your rent or mortgage, health insurance premiums, phone bill and subscriptions like your gym membership or Spotify subscription. Make sure you factor in any car payments as well as regular personal loan and credit card repayments.

When you've listed all your living expenses, divide them into fixed and variable expenses. Your fixed expenses stay more or less the same every month, such as your mortgage or rent; whereas your variable expenses are the ones that can fluctuate, such as your groceries, transport and entertainment. Pay close attention to your variable expenses, as this is where you'll likely be able to make the most adjustments. 

Step 3 - Do the sums

Now it's time to really get down to business. To find out if you've got more money coming in than going out, simply subtract your income from your expenses. 

If you've got extra money left over, congratulations - your personal finances are heading in the right direction. If you're running at a shortfall, your next step is to look at where you can save money, increase your income or both. Even if you do have more money coming in than going out, you can still look at where you could be make adjustments so you could possibly save even more. 

Step 4 - Look for where you could cut back to save extra money

Ideally, you should have more money coming in than going out, so you'll have enough money left over to put towards your savings goals. It's a good idea also to put an amount of money aside into an emergency fund on a regular basis to cover any unexpected expenses that inevitably come up. 

The easiest place to start looking at where you could make savings is your variable expenses - the chances are there are some areas that immediately jump out where you could be making savings. Perhaps it's using the car when it would be just as easy to catch public transport. Or maybe you're spending more on entertainment and eating out than you need to.

It's a good idea also to take a look at your fixed expenses and monthly bills - perhaps you're overspending on your mobile phone plan or health insurance premiums and could get a better deal.

Make sure you're not setting yourself up to fail

Even though cutting back on spending money is the goal, it's important that you don't set yourself up to fail, such as cutting out all money for entertainment or dining out. Rather, look at where you could change one spending habit to start with - maybe you could make your lunch three days a week, or give up the afternoon coffee while still enjoying your morning caffeine hit.

Getting debt under control

Depending on your circumstances, you might want to prioritise paying down any personal debt such as any personal loans or outstanding credit card balances, particularly as these often come with higher interest rates. You could also investigate switching to a credit card with a lower interest rate, or even consolidating any personal loans and credit cards into one loan - this could potentially not only save you in interest repayments, but also give you the convenience of only having to manage one payment instead of several.

Step 5 - Get saving

If your budget is at a stage where you're bringing in more money than you have going out, then you're in a good position to start saving. A good way to get the savings motivation going is to have a savings goal and set up a regular savings plan. It might also be a good opportunity to seek out some professional financial advice. 

It's ok to start small if you can't save much to start off with - the chances are when you see your balance grow you get the motivation to save even more.

Make sure you find a bank account that rewards you for saving, such as a savings account that pays bonus interest for regular saving and growing your balance. You could also help take the hassle out of saving by setting up an automatic transfer to your bank account to coincide with your payday. 

Keep track of your progress

Budgeting isn't a case of 'set and forget' - it's important you check in on your budget regularly and make tweaks where needed, or even create a new budget. If you've done a monthly budget, you might also decide that a weekly or fortnightly budget is a better budgeting system for you - just go with whatever template works for you.

It's also up to you what format you choose to do your budget - you might want to write it down,  use an excel document to create a budget spreadsheet or use an online budgeting tool such as our online budget planner.


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Important information

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice.