Want to save money but not sure how to create a budget? Take control of your finances with our simple budgeting tips.
We all have different saving goals in mind. You might be stashing money for a short-term goal, like a car or a holiday, or you may have something more long-term in mind, like retirement.
Why is budgeting so important?
Setting a budget creates an action plan. It provides you with a clear picture on where your money is ending up each month. It also helps you get off the treadmill of living from paycheck to paycheck, and enables you to sort out your money priorities and find that all-important balance between saving and spending.
Here’s how to get started:
1. Find a budget planning tool that suits you and stick to it
Whether you’re a fan of spreadsheets or you love the idea of an automated budget app that syncs directly with your bank, it’s important to choose a tool that suits your lifestyle and preferences. Consistency is key, so make sure you pick a tool that you feel comfortable using on a daily, weekly or monthly basis.
2. Record your expenses and income
Once you’ve got a budget tool you’re happy with, it’s time to calculate your income and expenses. Start by making a list of your monthly income sources (if you’re unsure of this amount, take a look at your bank statements). Once you’ve entered in your income, compile a list of all your expenses. This should include your rent or mortgage repayments, car repayments, gym memberships, phone and internet, insurance, groceries, and any entertainment, like streaming services (some apps even do this all for you). It’s important to also include irregular payments such car registration, gas and electricity.
3. Track your monthly spending
Once you’ve entered your income and expenses into your budget planning tool, we recommend you track your spending for at least two months. It might feel laborious but writing down everything you spend money on and how much will give you a good understanding of where your money is going each month. This will help you identify any patterns with your spending that could be cut back, or any recurring subscriptions that you’re no longer using.
4. Put a savings plan in place
Once you have a clear idea of the income that’s coming in and the money that’s going out each month, it’s time to think about saving. If your income exceeds your expenses, then you’re in a position to put a regular savings plan in place. If it’s the other way around, then you’re living beyond your means and it’s time to make some changes.
5. Keep your budget flexible
A good budget should be a living document that changes as your circumstances change and helps you achieve your financial goals, whether that’s contributing more to your superannuation each month or beginning to plan for your retirement.