Do you often find you’ve got too much month left at the end of your money? The best way to get your spending under control is to create a budget.

This can help you develop good habits like knowing when you have money, when you need to pay things off, and when you need to be more careful, which can help you avoid pitfalls and keep you on track to achieve your goals.

It’s hard to gain control of your money unless you know where it’s all going. From the chocolate muffin you bought when 3.30itis hit to the new jacket you popped on AfterPay, it all adds up. That’s why a budget is key.  

What is a budget? It’s a plan that matches a person’s expenditure against their income. It breaks up spending into defined categories so that limits can be set on specific areas. As a result, overspending can be readily identified.  

It’s not about cutting out all of life’s little luxuries – you can still enjoy your almond latte – but rather cutting out any overspending so the extra cash can go to your savings.

The main purpose of a budget is to help you:

  • live on less than you earn
  • spend money wisely
  • develop better money management habits
  • save at least 10% of your earnings
  • be prepared for financial emergencies
  • set your targets and goals

How to get started creating your budget

Now we’ve worked out that everyone needs a budget, the next question to ask is: should it be weekly, fortnightly, monthly, or yearly?

A short-term budget matched to your pay cycle can help you manage your spending between pay days – it can be a ‘control tool’ that helps you keep an eye on your regular spending, such as food, fuel, power, phone and entertainment.

By categorising your expenses, you can identify any areas where you might actually be spending more than you thought, and see if you can put more of that money away for a rainy day.

Once you have your short-term budget, it may be a good idea to design a long-term budget, such as a yearly budget.

This can give you a good overview of your income and expenses over 12 months, because it takes into account all those pesky ‘once a year bills’ like car expenses, club memberships, yearly medical checks, and insurances.

Some tips to remember:

  • Use after-tax income figures, not your gross salary
  • Don’t include irregular income that may not be reliable, such as overtime
  • Use consistent expense periods, such as weekly, fortnightly, or monthly
Resources

A few good money habits to get into

Pay bills on time

Set up regular payments to pay your bills when you know you’ll have money, like after your payday. If you get paid weekly, spread the payments across the month. Utilities companies often offer ‘bill smoothing‘, which spreads your payments out evenly over a year.

Put bonuses aside

Put any unexpected money, such as tax refund or bonuses, into your savings account or your superannuation account.

Reassess your situation as needed

If you find you’re running out of money, revisit your budget and cut back where you can.

Communicate

If something unexpected happens and you’re feeling stretched, talk to your bank about how they might be able to help you.

Pay yourself

Once you have your debt under control, set aside a portion of your income for savings. This amount should be allocated before purchasing any individual wants or needs. It can be as small or as large as you want. Paying yourself first is a great way to build a nest egg for the future and provides a cash buffer for emergencies that can crop up from time to time.

Protect your money

Create a strong online banking password, ideally combining letters and numbers. Always check your bank statements for anything that ‘looks wrong’, and always inform your bank if you’re travelling or moving house.

Some easy ways to save

  • Automate the boring stuff

    It can be pain, but spending a little bit of time on admin can help you save cash for better things. 

    If you’re guilty of missing payment deadlines, for example, you could be hit by late fees and even have your credit rating negatively affected. 

    Some time spent setting up regular bill payments through systems like a direct debitwhere the biller automatically withdraws from your account, or scheduled payments you set up via your own bank account, can help you save some easy money. 

    Remember: Make sure you have enough money in your account to cover your direct debits – you could be charged a fee by both your bank and the merchant if the payment is rejected. 

    Check your account regularly for ‘incorrect payments’ and to make sure cancelled direct debits have stopped. This must usually be done in writing to your financial institution and in some instances the merchant – check the terms on your direct debit form. 

  • Avoid online shopping pitfalls

    Even if you’re not a shopaholic, there are a few tips and tricks to keep in mind to avoid spending when you don’t need to when shopping online. 

    For example, make sure to compare prices across different retailers, and don’t forget to look at shipping costs. 

    You should also look into the retailer’s returns or exchange policy to see whether they offer free returns or whether you will have to pay return shipping fees.  

  • Identify the money wasters

    Most of us have, on occasion, spent money on something we know we could have found cheaper elsewhere. Think of that soft drink from the vending machine that cost three times what it would have at the supermarket… 

    Some money wasters, like the soft drink, are easy to identify, while others can be a bit harder to spot. Under-inflated tyres on your car, for example, are bad for fuel consumption and overall wear and tear on your car, costing you more in the long run.  

    However, money wasters often have one or two things in common: we either spent more for convenience, or were penalised for laziness. 

    It can be hard, but avoiding even small money wasters can help your hip pocket in the long run and find you easy money to put away. 

  • Manage compulsive spending
    • Get rid of credit cards completely or significantly reduce their limits
    • Don’t go shopping by yourself – you’re less likely to overspend if you’re with someone
    • Maintain a spending diary for a month and really take notice of what you’re spending your money on
    • Create a simple budget and see how your spending habits may be eating away at your finances
    • Admit you’re a compulsive spender and look at ways to channel that focus into saving for something you really want

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