How to start budgeting

Find out why budgeting matters and how to create a budget you can actually stick to.

Here's what you'll find out:

➜ What a budget is

➜ Why a budget is important

➜ How to create a budget

Budgeting. It’s one of those tasks you should have been taught in school, but probably weren’t.

It’s a plan for your spending and one of the most effective ways to achieve your financial goals. It doesn’t matter whether you want to clear a large debt or one day buy a home, a budget is going to be useful.

Before getting started, it’s important to know that one of the biggest misconceptions about budgeting is that it limits your spending. A good budget can mean you’re actually spending on what you’ve decided to, so you don’t have to feel guilty about it.

Setting up a budget means you’re:

  • Less likely to end up with unwanted debt
  • Less likely to get caught out by unexpected costs
  • More likely to have a good credit rating
  • More likely to be accepted for a loan or mortgage1

So, how do you create a budget?

Work out your income and expenses

You need to know how much money you’ve got coming in and how much money is going out.

Working out what you have coming in is the easy part. If you’re paid the same amount every month, use the amount that hits your bank account. If your pay varies from month to month, average it out over the last three months to give yourself a good guide.

You’ll need to do the same with your expenses. But to make this easier, it’s best to put them into categories. These can include:

  • Rent or mortgage
  • Debt repayments
  • Bills
  • Groceries
  • Transport
  • Saving
  • Take away food and eating out
  • Going out
  • Holidays

Assess your spending and ask some questions

Are you comfortable with what you’re spending?

If you are, you don’t necessarily need to make any changes. You can just choose to use this budget as a guide for your spending and check in regularly to make sure you’re on track.

If you're uncomfortable with what you are spending, is it the amount you are spending overall or is it your spending in a particular category? Do you want to be saving more?

Make changes to your spending

Based on how you feel about your spending, set yourself targets. Keep in mind, it’s important to be realistic. Completely cutting out take away food and going out may be great for your budget, but it may not be realistic. If you try to do too much, it may all feel overwhelming and mean you’re less likely to see any change.

So start small and build up. If there’s a category of spending where you want to cut back, try reducing it by about 10% or 20%. It won’t necessarily be easy, but an amount like this should be more achievable.

Factor in any irregular costs

There are times of year that can be more expensive than others. It could be a string of birthdays, the holiday season or an annual cost like car registration. Make sure you factor these in so you’re not left short when they come around.

Set up different accounts

Having separate accounts where you keep the money for different types of spending can help you stick to your budget. If your bank offers the option, then you can create these different spaces in your banking app and transfer the relevant amounts when you’re paid. Make sure you’re not paying extra fees for having multiple accounts – most transaction accounts might charge a fee but most saving accounts are fee-free.

You can also have different accounts for different purposes. A good example of this is having a bank account and a savings account. You can transfer your savings across when you’re paid so that you separate the money from your spending. You can also do this for bills and other costs.

You can separate your savings from your regular pay day by accessing your money through the Humanforce Thrive app. This might help keep your savings plan on track because you've separated the money.

Stick to your plan

A budget shouldn't be set and forget. It’s important to check in to make sure you’re on track and tweaking your budget as your circumstances change. Look at your spending against each category, that way you’ll be able to quickly pick up if you’re not quite going to plan. And you can keep making adjustments over time to make the budget work for you.

What next?

Want to get your spending in control now you’ve got your budget? See our tips.

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