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<\/p>\nWorking out a realistic budget is a great way to take control of your finances. Although it may seem like a chore, it’s the crux of sound \u2013 and sustainable \u2013 financial management. In this article we look at how to \u2018do the numbers.<\/p>\n
A budget shows you how much money you\u2019re earning, how much you\u2019re spending, and how much you\u2019re saving.<\/p>\n
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While it can be tempting to put it off, creating a realistic budget can help you hit your savings goals faster. Let\u2019s start with the numbers.<\/p>\n
For most of us, this is a matter of checking our payslip or salary credit and seeing what we get (after tax and super). It\u2019s trickier if you\u2019re a contractor or self-employed, or if your income varies wildly from month to month. Use your last tax return and work out your weekly net income (after business expenses, GST and PAYG).<\/p>\n
Do you have any other sources of income? Interest from investments, government contributions or child support payments? Work out what they average week to week, then add this in.<\/p>\n
It can be easy to underestimate how much you spend on a day-to-day basis. But in order to create a realistic budget, it\u2019s important to find out how much you\u2019re spending, and on what.<\/p>\n
Firstly, take a good hard look at your bank statements. Go back over the past two or three months and make a note of everything you\u2019ve paid for. Remember there are some hefty costs that only come up every year, or less, like car insurance and registration.<\/p>\n
It\u2019s helpful if you group things into categories. Let\u2019s start with the basics: food, clothing, housing, transport, communication and insurance.<\/p>\n
The biggest expense you\u2019ll face is probably your rent or mortgage. If you own your own place, you\u2019ll also be hit up for home maintenance (repairs), home and contents insurance, and rates. Plus utilities (gas, electricity, water etc.).<\/p>\n
If you\u2019re currently renting or considering renting, check out our\u00a0Renting vs Buying calculator<\/a>. This calculator shows you what size home loan repayments you may be able to service based on your current rental payments.<\/p>\n This includes your groceries, but also your takeaway lunches and evening feasts out. Don\u2019t forget those coffees and other incidental snacks \u2013 it all adds up.<\/p>\n You might want to divide this category into your work clothes and your fun clothes to sort out what\u2019s necessary and what\u2019s not. If shoes are your thing, you\u2019ll need to account for these too.<\/p>\n The costs of running a car or using public transport can easily add up. Fuel\u2019s just the start\u2014there\u2019s parking, repairs, preventative maintenance and insurance.<\/p>\n A really robust budget also factors in things like replacing your car at some point.<\/p>\n Public transport\u2019s often cheaper, and this also has to be factored in.<\/p>\n Consider the bills for your mobile, internet and (if you still have one) landline charges.<\/p>\n If you have any sort of insurance \u2013 health, life, medical, or perhaps income \u2013 you\u2019ll be paying premiums. They may be yearly or monthly, but make sure they\u2019re factored into your final budget.<\/p>\n Although these costs might be occasional, your budget should take into account things like medical spending (including the dentist) and pharmaceutical costs.<\/p>\n In this section you can also include lifestyle costs like gym membership and sports club fees.<\/p>\n Think about all those incidental costs that pop up over the year: magazine and TV streaming subscriptions, weekends away, movies, Christmas and birthday gifts.<\/p>\n Every now and then, you\u2019ll unfortunately have to replace the fridge, the washing machine, the TV, the lounge suite etc. Replacing these items can make a significant dent in your savings if you don\u2019t have a plan in place to prepare for them ahead of time.<\/p>\n Which includes personal loans, credit cards, store cards and other loans, and the interest that comes with them.<\/p>\n This is where you\u2019ll budget for everything else that doesn\u2019t fit within the categories you\u2019ve laid out. These might include pet costs, uni or office fees, childcare, beauty costs etc.<\/p>\n The government\u2019s\u00a0MoneySmart<\/a>\u00a0website also has a comprehensive section on budgeting that\u2019s worth a look.<\/p>\nFood and drink<\/h3>\n
Clothing<\/h3>\n
Transport<\/h3>\n
Communication<\/h3>\n
Insurance<\/h3>\n
Health and wellbeing<\/h3>\n
Life and leisure<\/h3>\n
Replacement costs<\/h3>\n
Debts<\/h3>\n
Miscellaneous<\/h3>\n