How to make and stick to a budget

Font Size:

Creating a budget that you will be able to maintain over the long term is a simple way to cut expenses and pay off debt, as well as increase your wealth. While devising a budget can be a big task, it’s definitely worth the effort.

Calculate what you’ll need

To create your budget, you’ll first need to know how much you’re currently spending. So consult your bank statements, receipts and financial files. Since some of your expenses will be sporadic, such as vehicle registration or health insurance, the best way to get an accurate financial picture is to calculate an average spend over at least six months. Do this by adding all your payments for the last six or 12 months, then divide by the number of months. This will give you your average monthly expenses. Before figuring out your monthly expenses, make sure you double check your sums – forgetting to add a bill can make a big difference to your overall spending plan. Also, try your best to factor in unexpected bills, such as dentist bills or car repairs, by adding an extra 10–15 per cent to your total expenses.

Work out your income

Now that you have an idea about your monthly expenses, you can work out your actual income. In addition to your regular salary or support pension, factor in any additional funds that you receive throughout the year. Include any rental income, cash gifts received and sales of your belongings, whether online or at markets.

Determine where you stand

To give yourself the best chance of creating a realistic budget, you need to determine whether you have a budget shortfall or coverage. To do this, simply subtract your monthly expenses from your income to find any remaining amount. If you discover that your ingoings are higher than your outgoings, you’re off to a great start. This amount can be used for pay off any debt or be absorbed into your savings. If you find that you’re spending more than you’re making, you’ll need to take some time to determine how you can reduce your spending (or increasing your income).

Cutting back on extra expenditures means looking at your monthly expenses and deciding which luxuries you can live without. When small payments are cut back, you can make significant savings. For example, one cup of coffee per day, five days a week, at around $3.50 adds to $70 per month. The tougher you are when cutting back, the more money you’ll be able to set aside for other important things. Try to find 10–20 per cent of your income each month to add to your savings account. If your extra expenditures are already low and you can’t find much to cut back, you might need to think about how to increase your income.

Keep a record of your expenses

Now that you have a budget, the next challenge is to stay on top of it. Keep a record of all of your expenses and income by writing everything down in a book or using one of these handy budgeting apps. Taking note of all your money will make you more mindful of saving it and not splurging unnecessarily.

Go easy on yourself

If you manage to stick to your budget most of the time, you’ll come out on top and reach your financial goal eventually. It’s okay to break your budget sometimes, as long as you get back to it as soon as you can. Remember not to be too strict– it can be a good idea to set savings goals and then reward yourself when you reach them.

Join YourLifeChoices today
and get this free eBook!

Join
By joining YourLifeChoices you consent that you have read and agree to our Terms & Conditions and Privacy Policy

Written by ameliath

5 Comments

Total Comments: 5
  1. 0
    0

    Useless !! the Prices just went up again !! 🙁 And if they keep it up Pensioners will be Chewing on a Rag !! 🙁

  2. 0
    0

    As from next Monday all pensioners in WA will get a 50% reduction in there food and power bills.

    They just need to prove that they spent a whole year at University before their 6th birthday.

  3. 0
    0

    The trouble is, too many people seem to think that a budget is a record of what you spend, not a plan to only spend what you can afford.


FACEBOOK COMMENTS



SPONSORED LINKS

continue reading

Health

Mozzies biting? Here's how to choose a repellent - and how to use it

Mozzies biting? Here's how to choose a repellent (and how to use it for the best protection) Shutterstock Cameron Webb,...

Entertainment

Sir Bob Geldof on grief, fame and getting through it all

I've hardly started questioning Sir Bob Geldof before he is off on a long, sweary rant about everything he thinks...

Australia

Abandon Australia Day and choose the history we want to celebrate?

Australia Day is the anniversary of the arrival of the First Fleet in Australia. On 26 January 1788, 11 convict...

Community

Speaking up for the disappearing art of listening

Columnist Peter Leith is 91 and describes himself as "half-deaf and half-blind". But he sees and hears a lot and...

Beauty

Hyperpigmentation: How to tackle those tricky dark patches on your ski

There are plenty of great things about summer - sunshine, picnics and fruity cocktails immediately spring to mind - but...

Australia

Enthralling, dystopian, sublime: NGV Triennial has a huge 'wow' factor

Refik Anadol: Quantum memories 2020 (render) custom software, quantum computing, generative algorithm with artificial intelligence (AI), real time digital animation...

Australia

Where to eat, drink and play on Kangaroo Island

Australia's third largest island is an oasis of pristine wilderness, premium produce and hidden secrets ripe for discovery. Easily accessible...

COVID-19

Will you need a vaccination to visit Australian venues?

State premiers have suggested that once vaccinations begin in Australia, those without vaccinations may be banned from visiting some venues...

LOADING MORE ARTICLE...