Budgeting 101

In good times and bad, one thing is for sure: it doesn’t hurt to be prepared. A budget will see you through fairweather and make sure you have a buffer to help cushion the blow of an unexpected circumstance like unemployment, medical expenses, an accident or even a global pandemic.

Though, while many of us understand the benefit of saving, few of us have actually sat down to make a budget. So follow these simple steps and hints to make an easy and achievable budget. 

Set a goal 

It’s cheesy but it’s so much easier to save if you know what you’re saving for. Be it a house deposit, a future holiday, a get away – having a concrete thing which you are saving for makes you much more likely to stay on track. Even if you’re just saving for a rainy day – set a monetary goal and agree to treat yourself when you reach it. If your goal is to have $10,000 in your savings account by the end of a set period take yourselves out to dinner or cook a fancy meal, order something online that you’ve had your eye on to be delivered or make a donation to your favourite charity when you reach your goal. 

Make a spending diary 

Before you make a budget you need to have a clear idea of where your money is going. Set out to examine your spending habits over a period of time.  As a household over a week or a keep a spending diary. If you’re looking for inspiration, check out the ones featured on Whimn or Refinery29. In this diary you’ll want to list all your income for the period and all the expenses everyday, from your rent, utility bills and mortgage payments to your pick-me-up coffee or cheeky end of day cocktail. At the end of the recording period tally up all your expenses and break them down into categories: food and groceries, entertainment, transportation, health, utilities etc. When you have divided your expenses throughout these categories you’ll be able to see where you can cut back. This is essentially a ‘baby budget’ and making this will fer you in the right mindset to tackle a proper household budget!

Make your budget

Now it’s time to make your budget. We’ll talk you through how to do it but there are a bunch of great online budget tools and templates such as this online budget planner that will also help you make an incredibly detailed budget with very little fuss. 

 Using a spreadsheet, notebook or an online tool like the one above take note of your combined income and expenses. Your income is simple enough, just look at your payslip and make note of how much you take home over a week, fortnight or month whenever it is you get paid. When listing your expenses remember to take into consideration your fixed expenses, debts and unexpected costs. In this case fixed expenses include rent, bills, transportation and family costs such as school fees and childcare. Debt expenses could include regular repayments such as HECS debt, mortgage repayments, or any loan repayment such as a phone contract. Remember to leave room for unexpected expenses such as medical bills and repairs. 

Once you’ve taken stock of how much you’re taking home, how much you’re spending and how much you’re wanting to save then you can set a spending limit. Make sure you’ve got all your bases and expenses covered and then set a spending limit that ensures you’ve got enough going towards your savings goal every month. 

A few words from the wise – tips to make your budget work! 

Remember to review your budget regularly. Every month is different so you shouldn’t expect your spending or your budget to look the same every month.  Of course you’re going to be spending more at Christmas time or when your kids are on school holidays. Also look for ways you can save money using cashback websites. In the same way, if you’re working from home you’re going to be saving on transport cost although your snacking budget might go through the roof!  

The budget is not just one person’s responsibility. If you live with roommates or share expenses or a bank account with your partner make sure you make a communal budget taking shared expenses into consideration. 

Cut yourself some slack. Making a budget is half the battle and, realistically, you’re not going to be able to stick to it every month. Unexpected expenses are bound to come up from repairs, medical expenses, unemployment to having to replace a device or household appliance. You can’t plan for these things and, even if they blow your monthly budget, you have to make sure you give yourself a break. 

Share this post: