How do you create a budget?
So you just spent your last $50 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.
What are expenses?
Fixed expenses: these are things you know the amount of, like rent, food, insurance, transport, and bills.
Debt expenses: this could be repaying credit cards or paying your HECS debt.
Unexpected expenses: These things can come out of nowhere and cost a whole bunch, like car repairs, medical bills, or extra school costs.
Tip!
Tracking your expenses is crucial, whether it’s in a notebook or on a spreadsheet, so you can have a balanced budget, meaning your expenses aren’t more than your income.
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.
You might want to consider getting multiple bank accounts to split up your money.
- A transaction account for regular spending.
- A transaction account for bills and expenses.
- A higher-interest savings account long-term savings.
Find out more in our ‘How do I navigate banking?’ and ‘How do you save money?’ articles!
Tip!
Set yourself a goal. Whether this is a spending limit or a savings goal, it is easier to stay on top of your money if you’re excited about where it is going. You can always adjust it along the way. A goal does not mean you can’t do what you like – in your budget, allow for going out with friends and buying yourself something nice.
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.
