Budgeting is a necessary tool for financial independence. It enables you to identify your outgoings, manage your income and reach your financial goals, whether it be paying off debt or saving for something special.

A budget needs to be achievable to help you reach your financial goals. It will help you keep expenses in control and manage unexpected bills.

We’ve listed some basic guidelines to get you on the right track:

  • Sit down and make time to check over your finances. Taking the time to create your budget means that you’re half way there already.
  • Note your income. List down all sources of income after tax so you know how much money you have on a fortnightly or monthly basis.
  • Identify your expenses. These can be grouped into categories such as household, entertainment, education, insurance etc.
  • Use online calculators as they can be a great starting point. 
  • Compare income versus expenses. Look for areas you may be able to cut back on. Do you really need that extra pair of shoes? Reducing expenses is often easier than increasing income.
  • Round expenses up to the nearest dollar and work out an average for fluctuating expenses, especially bills that come quarterly or annually.
  • Determine how much you can realistically save and include this as part of your budget.
  • If you use credit cards to pay for everyday expenses and then don’t have the funds to pay the debt off each month, it’s an indication that you are living beyond your means. Starting a budget will help to give you more guidance to take control of your finances.

Your budget needs to be reviewed at least annually or when your circumstances change (for example changing from full-time to part-time employment; divorce or separation, or receiving a pay rise).

Managing your budget is an ongoing commitment but you will be rewarded, particularly when you notice your improved ability to save and being able to afford more of the things you want most in life.