Getting started

Working out a budget can seem difficult. But it’s important if you are to manage your finances without struggling. If you follow this simple 8 step budgeting plan, you’ll soon know what expenses you have, what money you have left and be able to develop your savings goals.

Once you've set up your budget, use our budget planner on a regular basis, to keep of your income and expenses.

1. Your income

Write down your income. Income is not limited to your salary; include all regular income such as interest, and dividends. Use after-tax figures so you don’t get caught spending your tax. Don’t include irregular income like a tax refund or an annual Christmas bonus, because you can’t be sure you’ll get the same again.

2. Your expenses

Time to list all your expenses. Dig out those bills and receipts, go through your credit card and Everyday account statements as a way of tracking your expenses over time. You may find it helpful to put your spending in 2 main categories:

• The basics: these are the basic expenses you ‘need’ to pay. They usually include household bills such as electricity, gas and water, your rent or mortgage, groceries, healthcare, transport (car or public transport), education, etc. 
• Nice-to-haves: These are expenses that we ‘like’ to pay. They are important to your quality of life and social life. For example, a holiday, dining out, entertainment and buying gifts.

3. What’s the difference?

Now it’s time to work out the difference - your disposable income.

Add up all the expenses, and add up all your income. Subtract your expenses from your income. You’re looking for a positive amount left over. If it’s negative, think about how you can save money or boost your income. Check out our money saving tips for ideas.

4. Review

Now, double-check your estimates. Have a look at all your essential expenses – is there anyway you can save on any of these items? For example, if you pay for insurance premiums upfront you might save money compared to paying it monthly. We have a list of ways that you can save money. Check these out for ideas.

5. Pay yourself

As part of your budget, include a little ‘you’ money. Commit to paying yourself a small amount on a regular basis - and treat it as a necessary expense, just like a phone or electricity bill. Put it into a separate account. It’ll help you feel like you’re not constrained by your budget, and give you a bit of financial freedom. 

6. Regularly put money aside

Determine how much money you need each budget cycle to pay your expenses, then organise for an automated payment direct from your pay to a Bill Paying account that is separate from your everyday money.

This way, when you come to paying the bill you will have money put aside. You may even want to set up a couple of different Bill Paying accounts for different purposes, e.g. one for groceries and other consumables, one for utilities and one for clothes. It is really up to you – just do it!

With no ongoing account keeping fees, you can open up to 9 Bill Paying accounts to allocate the funds for specific purposes. 

7. Set yourself some goals

Budgeting isn’t just about the short term; it’s about allowing for your longer term goals. Taking control of your money doesn’t mean you have to restrict your budget to the bare necessities. If you want to save money for a deposit for a house, open an account that pays high interest and is not easily accessible such as our First Home Saver account. Then organise regular payments to it – you will be surprised how quickly these payments combined with compound interest and the Government contribution will make your savings grow.

8. Review and update

It will take some time and effort to get your budget into place, and you should regularly review and update your estimates. Keep a track of expenses to ensure whether they are close to your original budget. If not, adjust as you go. Perhaps there’s an unexpected expense such as a trip to the dentist. If this means one month’s budget goes over, see if you can adjust an expense in the next month to make up for it. Of course, if there’s a change in your income - such as a new job, a second job, or a pay rise - recalculate your budget. After a year, look back at the real expenses and income that you’ve tracked, and refresh your budget.

Congratulations

You are now on your way to being financially independent. Yes it can take some time, but you won’t think so once you watch your hard earned money working smarter for you.