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How to create a budget

What is a budget?

A budget is a plan that helps you to understand exactly how much money is coming in and going out of your bank account every month. It's an excellent tool for helping you to prioritise your spending and make cuts where necessary to save money for long-term needs and goals.

How to start budgeting

1. Choose your budget format

A budget can take many forms. It could be as simple as a written-down list on a piece of paper or a spreadsheet, or you could take advantage of the many apps and tools available online. Whatever you choose, make sure it's something you'll easily be able to follow and update. 

2. Calculate your income

Before tracking how much you spend, you should start with how much you can afford. Go over your bank statements from the past three months or more and note down all the income you have received.

This could be the salary from a regular full-time or part-time job, a student loan, a trust fund or other money you receive from your family or other loved ones. If the amount varies from one month to another, add up the total and calculate the monthly average.

Once you know how much you earn in a typical month, you can set a baseline to ensure you're not spending more than you can afford.

3. Break down your regular outgoings

Again using the last three months or more as a guide, note down all the things you spent money on each month and sort them into specific categories:

  • bills (e.g. phone, internet, service subscriptions)

  • rent or mortgage

  • groceries

  • transport and fuel

  • eating out

  • shopping and treats

Add all of these monthly expenses up and compare them to your monthly income to get a view on how much you have left over. 

4. Make a plan

If you feel that you're spending too much, or you want to save more money towards a long-term need or goal, take a look at any changes you might be able to make.

These could be small adjustments like cutting down on restaurant trips or trimming your weekly food shop. You could also look at ways to save money on essential bills by cancelling some subscriptions or switching to a new provider. 

5. Set achievable goals

Once you've identified areas in your monthly expenses where you would like to make some changes, set yourself a monthly or weekly savings goal.

This might include making some sacrifices along the way. If you give yourself a $100 budget for clothes each month, it might mean choosing between a pair of trainers or a new shirt. Decide which one you need more, and maybe the other can wait until next month instead.

You should allow for irregular costs as well, such as car tax, holidays and special occasions like Christmas or a loved one's birthday. Putting a little money aside each month for unexpected costs can be a useful way to stop them from throwing you off-course.

Consider opening a savings account to deposit a regular sum each month. This will reduce your temptation to spend it elsewhere and help you to see the benefit of your efforts.

Remember, aiming high is great, but try to be realistic - if you make things too hard for yourself, you are more likely to become disheartened and fall back on old spending habits. We all need to live a little! 

6. Be consistent and stick to the plan!

Consistency is key when it comes to maintaining a healthy budget. Make sure you review your spending each month and make note of areas where you've done well, and things you could improve on.

Don't be afraid to re-adjust if something isn't working. A budget should be a long-term plan, so it needs to be something you can live with. You may find that certain things are harder to cut back on than you thought, but perhaps you could make up that shortfall by cutting back in another area?

If you have a specific savings goal in mind, you can also speak to an advisor at your local bank. Our team will be happy to discuss your financial health and help you to understand where you might be able to make positive changes to make your money go further

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