So you’re going to give budgeting a crack? Awesome! Prepare for something life changing (and try not to fall asleep in the corner).
Here are a few tips to get you started.
Keep a money diary
I know, we said it already, but step 1 in creating a budget that will actually work for you, is knowing what you do with your money now. You can use this Money Diary Template to track your spending or download an App like Money Smart’s Track MY Spend.
Use a budget calculator
Unless you are a spreadsheet ninja, using an online budget calculator, like this one , generally makes the whole process much easier. Gather up info from your money diary, or get your transaction history from online banking, and put this info into the budget calculator. It will magically* calculate your total income and expenses for each week, month or year and tell you what’s left over.
What is left over?
If you do have something left over, you’re already winning. Your leftovers are called a budget surplus - meaning you spend, or plan to spend, less money than you get. This means you have some money you can use to help you reach your savings goals. No leftovers? When you spend, or plan to spend, more money than you have coming in, you get a budget deficit. Time to revisit the budget calculator.
One of the great things about an online budget calculator is that you can play with the numbers and instantly see what the effect is on your budget. You might find some of your costs are fixed (like a mobile plan or car rego) and can’t be changed. Instead, look at the things you can change, like spending a little less on take-away or the movies, or opting for a cheaper version of something OR on the other hand, increasing your income. The important thing here is to make realistic changes. Don’t take out all the budget for movie tickets if that’s something you enjoy – you will only end up feeling cross that you can’t go to the movies or guilty for spending the money when you do. Budget for it (even if it’s less money than you used to spend) and love it when you do go
TIP: It’s a great idea to think of your savings as a fixed expense. This way they are less likely to be mistaken for money you can spend elsewhere.
*No actual magic used. Proper mathematical calculations at work here.
How did you go?
A final, but important, step is to review your budget regularly. Reviewing gives you an opportunity to change things (ok – I can’t live without skittles, let’s budget in $75 for those). The aim is to get your budget to a point where it’s a pretty accurate reflection of a spending pattern that works for you. Of course things will change, your income might go up (or down), you might decide you want to save up for something so will need to factor those changes in.