How do you create a budget?
So you just spent your last $20 on a new pair of sick sunnies but you don’t get paid for another week? What a nightmare! A budget helps you to track how much money you’re spending. It will show you how much money you have to spend or save, so you don’t end up in a financial pickle.
The first step is to understand how to break down your money!
- The money you earn is called your income
- the money you HAVE to spend regularly on things like your phone, rent and food) is called your expenses
- If you subtract your expenses from your income, whatever’s left over is your disposable income (the money left over for you to save or splurge).
Once you work this out, it’s easy to start saving money for that big purchase you have in mind and make sure your money doesn’t run out between pays.
The 50/30/20 rule
This strategy breaks up your income into 50% necessities, 30% wants, and 20% savings. This way you know what is a necessity and what you could live without (like that new pair of trendy shoes).
You can play around with the percentages. Let’s say you are planning a big trip and maybe you want to save more, this might mean that your wants category is smaller or you are living at home, so you lessen your necessities category.
Watch this video to learn how to set a budget – and stick to it!
Where to start?
There are some great tools out there to help you work out a budget, if you don’t want to do it manually. Check out Money Smart’s Budget Planner which will work out your income, expenses and disposable income in a handy graph.
If you’re worried about overspending, these days many online banking apps have breakdowns of where your money is going. You can find out more about budgeting on the Youth Central website.
Find out more in our ‘How do you save money?’ article!
What if I’m in debt?
If you are in debt, try speaking to a financial counsellor. They will give you advice to help you manage your money, and it’s free! Check out Financial Counselling Australia to find a counsellor near you, or call 1800 007 007 to speak to one on the phone.
