There are a few steps you need to follow to prepare your budget. Take a seat and grab a frosty beverage before doing this (but not too many beverages, then things will get a lot more difficult), because this may take a little time. But trust us, it’s totally worth it in the end!
1. Set a time period
The first step is to decide what time period you will budget for – whether this be week to week, per fortnight or monthly. It’s usually a good idea to make this coincide with how often you are paid. If you’re paid once a fortnight, think about budgeting fortnightly to make things easier.
2. Find out what you spend money on
Do do this, you’ll need to go through all of your expenditure in order find out where your money goes. Yes, that means going through your bank statements, bills, credit card statements, receipts, shopping dockets and any thing else you can think of. A good timeframe to look at is the last 6 months. Once you’ve done this, divide the total amount you’ve spent in those 6 months by the time period you set in the last step (6 for monthly, 12 for fortnightly, 24 for weekly). There, that’s the average amount you’re spending during your time period – it’s probably more than you’d think, right?
3. Find out what you WANT (or need) to spend your money on
In this step your aim is decide what you want to save up for. This could be that car you’ve got your eye on, a holiday with friends, an existing debt you need to pay off, or simply just saving for the sake of it. You’re gonna need them one day!
4. What’s your income like?
This step is pretty straightforward. Add up your pay, any Centrelink benefits and any other forms of income you can think of.
5. Make priorities!
This is the tough part. Take your pay and minus what you’re saving up for. For example if you are saving up for a $600 holiday in 6 months, you’ll need to set aside $100 a month, $50 a fortnight, or $25 a week. Do this for all major recurring bills (think phone bills, rent, utilities and subscriptions).
With the remaining amount of pay you have left, decide what you can live without and what you cannot. Maybe you’d be better off cancelling that Netflix subscription so that you can use that cash on other expenses. You need to be ruthless here, but you also need to be realistic. There’s no point telling yourself that you won’t buy that kebab after a night out when we all know you absolutely, definitely will. And that’s okay, we wont judge so long as you’ve budgeted for it.
6. Open a savings account
Open a savings account, preferably with high interest to maximise your returns
. This is where you will transfer money for things that you are saving for. Even better, transfer any money left over at the end of the month, fortnight or week so that you have an emergency fund when you need it.
Note: make sure you understand the fees and rules of your savings account savings account
. No point opening an account to save money if it is going to cost you to keep it open or to take funds out when you need it most!
7. Stick to it!
The next section will help you with this final step, which is the most important and most difficult part of having a budget.