Get Yourself FinLit

Everyday Budgeting

Designing a budget and watching how much you spend may seem like something your parents would do, but trust us: it’ll pay off big-time in the long run. No one wants to be excluded from a night out or a holiday trip with mates because they’re broke three days into the week.  Setting a budget and sticking to it ensures that you’re able to spend money on the things you want, while still being able to afford all the other pesky things in life like food and shelter and toilet paper (total drag, right?).

What are the benefits of a budget?

Take control of your money and spend it on you: Creating a budget gives you to have an overview of where your money is disappearing to! Once you know this, you can take control and decide that maybe all that money you’re spending on takeaway pizza could be better used on a holiday later in the year or a new phone. Whatever your interests, creating a budget helps you invest more in them and better enjoy them.

Make priorities and stay out of debt:

Debt can be crippling, and should be avoided at all costs. Ever had to dig into your savings in order to pay that phone bill or barely scraped past paying rent? Making a budget let’s you decide what you should prioritise and ensure that you stay out of debt, be that to your parents, mates or to The Man (or the bank as it is more commonly referred).

Preparing your budget

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.

Using your budget (and sticking to it!)

Needless to say, it’s useless creating a budget if you don’t have a plan to stick to it.

Use that savings account!

As soon as your pay arrives in your bank account, pay all bills that you have outstanding and transfer funds for what you are saving for across to your savings account.

Track your spending

You need to ensure that you’re on course to stay on budget. You can do this by reviewing your bank accounts frequently or downloading a budgeting app, such as TrackMySpend or Toshl. Apps like this allow you to keep tabs on how much you’re spending so that you can stay on track!

What if I have money over at the end?

Put it in that savings account we keep talking about! You’ll want it later, trust us.

I’m in debt, help!

This is where it gets tough. There is no silver bullet to overcome debt and every situation is different.

One tactic is to be more critical of your spending – go over your bank statements again and cut down on spending. You may have to change your lifestyle slightly in order to live within your pay packet. This means thinking critically about every purchase you’re going to make. It’s not going to be fun, but it’s worth it to get out of debt and strengthen that financial willpower.

Lastly, you may have to dig into your precious savings account. If you go down this route, ensure that you budget in a way to replenish what you took out in the future.

Good luck!

This information is intended to be general in nature and should not be relied upon for personal financial use.
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