How to create a budget & stick to it.
Take a look at the basics of creating a budget, with some handy tips to help you get into the habit of budgeting regularly.
Sitting down to make your budget might not sound the most fun way to spend your time.
But take a deep breath, and dive in. You'll feel better for it. Your budget is made up of your income, your expenses, and the money left over – this might be what you stick into savings or use to pay down debt.
The basics of making a monthly budget:
- Write down all forms of income, from your regular pay to investments and jobs on the side.
- Write down your regular expenses, starting with things like your rent or mortgage, bills, childcare, insurance and transport costs – everything you know will be coming up to be paid. Because some expenses – like your power bill – change from month to month, go into your bank statements for the last few months, and work out the average charge. Then put that amount in your budget. Don't forget to add regular payments you make, like credit card or hire purchase payments, regular subscriptions etc.
- What's left is your money for everyday spending, for adding to debt repayment, and for your savings. Set some rules around how much you want to save and how much you can spend daily, and try to stick to them. Having separate bank accounts for your expenses, everyday spending, and your savings is a great help here – as well as an emergency funds account for those unexpected expenses (like a car breaking down etc.). Check out Westpac bank account options – many of which you can open online through Westpac One®.
Hot tip: If your outgoings are more than the money coming in, this is living beyond your means, and you're on the path to being in debt. But now you know exactly where you stand, you can make some adjustments to your spending.
Get tools to do the hard work for you
There's no need to painstakingly input every purchase and expense you make into a spreadsheet, or write it out by hand. Make technology do it for you!
There are some great apps and online platforms that track every transaction going in and out of your account, then categorise them and show you an overview of your spending in simple graphs and diagrams. You can set budgets for each category of spending, and get real-time updates on whether you're going to stay within your budget, or you're overspending.
Westpac's free spending tracker and budgeting app is called CashNav®, and it helps you to identify trends in the way you're spending.
Keep it real. Don't "forget" expenses
It's all too easy to allow ourselves to ignore or guess the real amount of expenses we have, and what we spend our money on. But if you create an unrealistic budget – conveniently leaving off things you know you spend on, like a bought lunch three times a week, Friday drinks at your local, or your regular trip to the hairdressers – you'll always be playing catch up and your budget will always be on the back foot. And you're more likely to be running dry before payday. So be honest and put all your expenses in your budget.
Keeping yourself motivated and your savings growing
One of the easiest ways to let your budget slip is by not keeping up with your savings goals – whether that means not putting aside as much as you intended one month, or by tapping into savings that you didn't want to touch. A couple of tips to help your savings discipline:
- Think of putting money into savings as "paying yourself" – that way it's a reward and a motivator, not a punishment that takes away from your spending money.
- When your money has been transferred into your savings account, try to think of it like paying a bill – it's gone, and you can't dip into it again until you hit your savings goal or it's a real emergency.
- Visualise your savings goal to make it feel more real – put a picture of Fiji on your fridge, or the car you want as your desktop background.
- Know what you can comfortably commit to. It can be a real de-motivator if you're consistently putting money into your savings account but you're having to consistently dip into it because you've over-extended yourself.
- When deciding how much you're setting aside into savings, think about both the goals you're saving for and where money will come from if something unexpected occurs. If you have an emergency fund, as well as savings for goals, like that trip to Fiji, then if you have to dip into the emergency fund, your Fiji-fund remains untouched.