Save
How to establish a budget
Learning how to keep your expenses within a set budget can help you save more money. But while budgeting is a necessary skill to achieve financial independence, it’s typically self-taught.
How to establish a budget
Learning how to keep your expenses within a set budget can help you save more money. But while budgeting is a necessary skill to achieve financial independence, it’s typically self-taught.
Budgeting is simple, and so is establishing one, but it requires a lot of self-control to actually execute and maintain a budget plan regardless of your income level.
Here’s what you need to learn about establishing a budget.
Create a personalised budget
Creating a budget plan will help you understand how likely you are to reach a goal and allow you to draw up a reasonable savings strategy.
Imitating a generic budget or someone else’s budget plan can be helpful to some extent, but since we all have different circumstances, it’s best to personalise your budget. To do this, consider the following steps:
Determine your income
List down all your sources of income that you can use, such as your salary and investment returns outside super. This step is necessary even if you have an irregular income because creating a budget plan based on your income is supposed to help you manage a decent lifestyle.
If you have an irregular income, you still need to list down how much you can usually expect without including one-time or conditional windfalls, such as commissions and bonuses for reaching quotas.
From this, take out your taxes and voluntary super contributions, if any, to reach your net income.
Track your spending
Once you’ve determined your net income, list down all your expenses and categorise them according to how necessary they are to maintain a decent lifestyle.
Take note of recurring expenses, especially those that are non-negotiable, such as utility bills, groceries and other living expenses. Consider opening a separate bank account that is set up to automatically pay for these fixed expenses.
Evaluate your other expenses and decide whether you can limit some of the recurring but non-essential expenses. You may also review your bank statements to check your transactions from month to month, as well as any unexpected expenses you may have encountered.
You may start tracking your monthly expenses in a notebook, spreadsheet or budget calculator application. Likewise, there are free mobile applications that does the job both for iOS and Android devices.
Tighten your budget
Go over the list a couple of times to pin down every possible expense, and once everything is written down, pinpoint unnecessary expenses, flag them for removal and tighten your budget for the recurring ones. The latter may be done by monitoring and reducing consumption to lower the bills. Switching to a lower-cost provider is also a good alternative.
Once you’ve adjusted your spending for your living expenses, you may top up your payment for any debt you may have, such as your student loan, if you have one.
Likewise, you may stash the extra money in your savings account.
Save money
Be strict about keeping expenses below your income: live within your means in order to free up enough money to save.
A good strategy is to limit spending to a weekly or daily allowance that already takes transportation and other necessary costs into consideration.
Likewise, paying off your debts, such as your student loan, earlier can help you increase your budget for other needs faster.
Your budget can only be effective and consistent when your debts are paid because you’ll no longer have to worry about ballooning interest payments.
Explore nestegg for more budgeting and saving ideas.
RELATED ARTICLES
About the author
About the author
How to budget
The psychology behind saving: Understanding and overcoming common barriers
Saving money is a fundamental aspect of financial security, yet many people find it difficult to set aside a portion of their income regularly. Read more
How to budget
Smart saving tips for first home buyers in Australia
Purchasing your first home is a significant milestone, but the path to homeownership in Australia can seem daunting due to the high property prices and competitive market. However, with the right ...Read more
How to budget
Crafting your safety net: Building an emergency fund in Australia
In uncertain times, having an emergency fund is more than a financial buffer—it's peace of mind. For Australians looking to start their journey towards financial security, building an emergency fund ...Read more
How to budget
The psychology of saving: How to train your brain to cut expenses
Saving money is more than just a practical financial strategy; it’s a mindset that requires discipline and a reorientation of one’s approach to spending and savings. Read more
How to budget
5 budgeting apps that will transform your savings
In the digital age, managing personal finances has shifted from pen and paper to smartphones, with budgeting apps becoming invaluable tools for those looking to save money. With an array of features ...Read more
How to budget
Handy tips to send your money worries to the chopping block
Sorting out your finances can be easier said than done, especially in the aftermath of the short Easter break when distractions are unrelenting and stress levels are worked up at fever pitch. Read more
How to budget
6 ways to clean up your personal finances
Bringing your spending under control can sometimes feel daunting. Here are some ways to start. Read more
How to budget
5 ways to be smarter about your money in 2021
Start the new year on a high note by stepping away from bad financial habits. Read more
How to budget
The psychology behind saving: Understanding and overcoming common barriers
Saving money is a fundamental aspect of financial security, yet many people find it difficult to set aside a portion of their income regularly. Read more
How to budget
Smart saving tips for first home buyers in Australia
Purchasing your first home is a significant milestone, but the path to homeownership in Australia can seem daunting due to the high property prices and competitive market. However, with the right ...Read more
How to budget
Crafting your safety net: Building an emergency fund in Australia
In uncertain times, having an emergency fund is more than a financial buffer—it's peace of mind. For Australians looking to start their journey towards financial security, building an emergency fund ...Read more
How to budget
The psychology of saving: How to train your brain to cut expenses
Saving money is more than just a practical financial strategy; it’s a mindset that requires discipline and a reorientation of one’s approach to spending and savings. Read more
How to budget
5 budgeting apps that will transform your savings
In the digital age, managing personal finances has shifted from pen and paper to smartphones, with budgeting apps becoming invaluable tools for those looking to save money. With an array of features ...Read more
How to budget
Handy tips to send your money worries to the chopping block
Sorting out your finances can be easier said than done, especially in the aftermath of the short Easter break when distractions are unrelenting and stress levels are worked up at fever pitch. Read more
How to budget
6 ways to clean up your personal finances
Bringing your spending under control can sometimes feel daunting. Here are some ways to start. Read more
How to budget
5 ways to be smarter about your money in 2021
Start the new year on a high note by stepping away from bad financial habits. Read more
More articles
OUR PLATFORMS AND BRANDS
- Accountants Daily
- Accounting Times
- Adviser Innovation
- Australian Aviation
- Broker Daily
- Cyber Daily
- Defence Connect
- Fintech Business
- HR Leader
- Independent Financial Adviser
- Investment Centre
- Investor Daily
- Lawyers Weekly
- Money Management
- Nestegg
- Property Buzz
- Real Estate Business
- Smart Property Investment
- SMSF Adviser
- Space Connect
- Super Review
- The Adviser
- Wellness Daily
- World of Aviation
EVENTS AND SUMMITS
- Accountants Daily 30 Under 30 Awards
- Adviser Innovation Summit
- Australian Accounting Awards
- Australian Aviation Awards
- Australian Broking Awards
- Australian Defence Industry Awards
- Australian Law Awards
- Australian Space Awards
- Australian Space Summit
- Better Business Summit & Awards
- Broker Daily Business Awards
- Corporate Counsel Summit & Awards
- Cyber Security Summit & Awards
- Defence Connect Budget Lunch
- Defence Connect DSR Summit
- Fund Manager of the Year Awards
- ifa Excellence Awards
- ifa Future Forum
- Investor Daily ESG Summit
- Lawyers Weekly 30 Under 30 Awards
- Lawyers Weekly Women in Law Forum
- New Broker Academy
- Partner of the Year Awards
- REB Awards
- Reinnovate
- SME Broker Bootcamp
- SMSF Adviser Technical Day
- Super Fund of the Year Awards
- Women in Finance Awards
- Women in Law Awards
- Accountants Daily Podcast Network
- Australian Aviation Podcast Network
- Broker Daily Podcast Network
- Defence Connect Podcast Network
- HR Leader Podcast Network
- REB Podcast Network
- Relative Return
- Space Connect Podcast
- The Adviser Podcast Network
- The ifa Show
- The Lawyers Weekly Show
- The Smart Property Investment Show
PODCASTS
LEARNING AND EDUCATION
MOMENTUM MARKETS NETWORK
LINKS
STAY CONNECTED
Make your nest egg grow. Register now for nestegg updates.