How to create a budget in 3 easy steps?

A budget records your money coming in and going out and is a powerful way to take control of your finances, reduce stress, and plan for your future. There is no one-size-fits-all approach, but here are some tips for creating a budget.

Step 1. Calculate your income net of tax

This is the amount you get paid into your bank account. Don’t forget to include income from your savings and investments.

If you have irregular income from work or business, calculate an average income based on your earnings over the past years.

Step 2. Track your spending

Most of the major banks in Australia provide details of your income and expenses in the banking app or online portal. You can also check your bank statements to manually track your spending.

The MoneySmart website has an online budget planner and an Excel spreadsheet that can be used to track spending and create a budget plan.

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

• gym memberships

• entertainment.

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.

Step 3. Create a budget plan

Once you have figured out your net income and expenses, subtract your total expenses from your income to see if you are living within your means. If you are spending more than your income, adjust your expenses to ensure you are not overspending.

Review your budget regularly to stay on track, especially when your circumstances change.

Once you have figured out your saving capacity, you can plan for the future.

General Advice Warning - Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs.  Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.