Everything you need to know about how to budget
One of the first things you need to do when taking control of your money is to create a budget. It's all well and good when somebody says "you need to budget" but where do you start? Here's a simple guide to getting you going and staying on track.
1. Set your goals
Are you sick of living from pay to pay and want a plan to meet your financial commitments more comfortably? Are you saving for a holiday, new car, house deposit or rainy day fund? How much do you need to set aside and what is your time frame?
Be realistic and write down exactly what your goals are to keep you motivated.
2. Find a budget planner that suits you
There are a number of good budget planners online. A good place to start is ASIC's MoneySmart website.
Its calculator will help you work out where your money is going annually, quarterly, monthly, fortnightly and weekly.
MoneySmart's TrackMySPEND app is also a handy budgeting tool. Before you sit down to start your budget, make sure you have all your documentation, such as pay slips, utility bills and insurance policies.
This will give you a good idea of how much fixed expenses will be for the month. Other handy personal budgeting apps include Pocketbook, Goodbudget, Mint and Wally. Apps are no doubt the best way to go as you can enter your spending as you go, which is also going to be a more accurate reflection of your finances.
3. Tracking your spend - every single cent
This is probably the most confronting part of your budget planning.
To accurately record your outgoings, you need to note every cent you spend. This includes the little things such as your morning coffee and random grocery shops.
Budgeting apps are no doubt your best option as you can enter your outgoings as they occur, which will be a more accurate reflection of your spending.
4. Monitor your spend
Are you on track? If not, why not? What can you do without? How can you do things smarter? Do you really need that TV subscription service?
Being a little more organised (which doesn't cost a cent) the day before could mean the difference between buying lunch at work or taking it from home.
Remember, the little things add up.
5. What to do with your savings?
It's a good idea to put your savings into a separate account so that you're not tempted to touch them.
Another idea is to invest them.
For example, the micro-investing app Acorns allows you to invest spare change from your everyday purchases in a diversified portfolio of stocks and bonds.
6. Review your budget regularly
If you have a long-term budget, it's important to review your plan every three to six months, as circumstances can change. For example, you may receive a promotion at work, change jobs, sell your car or change living arrangements.
7. Help! I'm spending more than I can afford
Don't let this deter you. It's not the end of the world.
Review your spending patterns and try to identify where you can cut back.
Is your original budget plan realistic? If you're not the type who can go in hard and fast, then don't.
Take baby steps. If it means putting aside $100 a month instead of the $200 you had in mind, it's still a good start.