Learn how to manage your money and understand where it goes.
For many of us, making a budget seems like a daunting and fairly stressful task. However, a budget is an essential component of money management and can help you get a handle on your finances and plan for your future. Instead of picturing your personal budget as a scary list of restrictions, imagine it as the path to a happy and well-organised life.
What is a budget?
A budget records the money you have coming in (income) and the money you plan to spend (expenses). There’s no one-size-fits-all approach to making a budget, but here are some tips to build your own personal budget planner.
Remember that a budget isn’t just a way to keep track of your own spending habits. A good budget will also outline your personal financial goals and what steps you need to take to achieve them.
Why do you need a budget?
A budget clearly shows how much you’re earning, how much you should be spending and what you’re spending your money on.
Your budget can identify areas where you may be overspending or could potentially spend a bit more. This could help you to prioritise between essential (non-discretionary) and lifestyle (discretionary) expenses.
Your personal budget will calculate either a surplus (meaning you have enough income to cover projected expenses) or deficit (meaning your expenses are greater than your income).
Managing your budget and aiming for a healthy surplus (saving more than you spend) can help you achieve goals big and small-whether you’re saving up for a long-weekend getaway or a down payment on a home.
How to create a budget in 3 easy steps
1. Calculate your income
Income can come from many sources, such as your regular pay, any side income you have and government assistance you might receive. Don’t forget to include savings and earnings from any investments. To get an accurate financial picture, make sure you account for every source of income you have—even temporary income or a small sum.
2. Work out your expenses
Start by reviewing your bank and credit card statements, bills and receipts to work out what you’re spending money on and how much you’re spending.
Your expenses will include things such as:
home loan or rent
groceries and dining out
utilities such as gas, electricity, internet, phone bills and water
transport costs like public transport, petrol and tolls
medical expenses, such as health insurance or regular medications
school fees and costs
pet ownership costs, such as vet expenses and pet insurance
pay TV and music subscriptions
Don’t forget to include expenses you may pay quarterly or yearly, such as home or car insurance, car registration and servicing, and property rates.
3. Set up your budget
An online budgeting tool, such as a Budget Planner calculator, can help you easily build a budget and get a better understanding of your finances. By simply adding your income and expenses, and how frequently you earn or incur them, you can create a view of your total weekly, fortnightly, monthly and annual income and expenses.
Once your budget is set up, it’s important to monitor your spending to make sure you’re on track.
Making digital payments and automating many of your regular payments via direct debit can be helpful when budgeting, because you’ll create electronic records of your spending that are easy to track.
Reviewing your budget
It’s a good idea to review your budget regularly, to make sure it’s still accurate and up-to-date. Any change in circumstances, which leads to a change in your income, expenses, debts or financial goals, might signal a need to update your budget, such as if:
you get a new job or promotion
you’re made redundant
you get married or divorced
you buy a house
you get a pet
you have a baby.
If you need assistance with setting up a budget contact us today on 02 9635 9353.
Important: This information is provided by AMP Life Limited. It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling 02 9635 9353, before deciding what’s right for you.
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