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Sometimes it's easier to not look at your spending habits. The trouble is, you can’t manage your finances until you start to understand them – that’s why you need a budget.

A budget is a great way to keep your finances in order – it’s a detailed monthly plan that shows exactly where your money is coming from, how much is in your pocket and where you are spending it.

Creating a budget can help you quickly pinpoint common pitfalls such as overspending. Despite what you might think, a budget does not have to be restrictive or overly impact your lifestyle. It should incorporate realistic, short and long term financial goals and by incorporating your spending and saving into a budget, so you can achieve them.

The basic steps of setting up a budget remain the same, whether you prefer to use a pen and paper, or a budgeting tool.

  • Step 1 - Gather as much information as possible: Get all your financial information, such as bank and investment account statements, recent utility bills and any information about the money you have coming in and what you spend it on (NetBank is a great way to access this information). The more information you have, the better.

  • Step 2 - List income sources: Record all sources of income, such as your salary (net income, or take home pay, is fine) and outside income (e.g., interest on investments). Write down your total income as a monthly amount (if you’re paid more frequently it may be easier to plan your budget over your pay period – e.g. budget per fortnight).

  • Step 3 - List your expenses: Now the challenging bit, list all of your expenses, such as rent or mortgage repayment, car repayment, mobile phone and data, insurance, groceries, petrol, travel, utilities, entertainment and education expenses. Make sure you don’t leave anything out - a common error is to exclude ‘one-off’ or infrequent payments.

  • Step 4 - Split expenses into fixed and variable: Fixed expenses broadly stay the same each month (mortgage/rent, insurance, car loan, etc). Variable expenses change from month to month (groceries, petrol, entertainment, etc) – so you’ll have to average these. If you're a CommBank customer, the MySpend tool can help you with this.

  • Step 5 - See the big picture: Once you have totaled your income and expenses, you can see the bigger picture. If your income exceeds your expenses, you’re off to a good start. If it’s the other way round, like many Australians, you are living beyond your means and it’s time to make some changes.

  • Step 6 - Create your savings plan: Your savings plan is based on your initial budget, but with changes made to enable you to save. Work out how you can spend smarter or cut back on spending in other ways. Normally the variable expenses you’ve listed out are the ones that you can find savings with. Alternatively you could increase your income by taking a second job, working extra shifts or working to get a promotion.

You can then make adjustments to your budget. The key is making sure it is always balanced with all income accounted for and budgeted to a specific expense, including contributions to a savings account. Each time you cut your costs or increase your income – the amount set aside for saving should increase. 

We have savings strategies and money saving tips to help you balance the books. If you’re still struggling why not speak to one of our Savings Specialists who can help you get started.

How to create a budget

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Things to know before you Can: The advice on this website has been prepared without considering your objectives, financial situation or needs. Before acting on the advice, please consider its appropriateness to your circumstances. Please view our Financial Services Guide.

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