Budgeting

Why budget?

A budget lets you know if you're living within your means. It's the sum of your income (wages, salary, interest from bank accounts etc.) minus the sum of your expenses (rent, food, bills, mobile phone etc.) What you're left with is your 'disposable income' - the money you can afford to spend on things you like, or save.

A budget can also help you save for a something like a holiday, a new laptop, a car, a house or an investment portfolio.

When working out your budget, if you discover you're spending more than your income, you need to either increase your income or reduce your spending to avoid debt.

How do I create a budget?

Here are two online resources that will help you create a budget:

Set realistic goals

Here are some tips to help you set a realistic budget and stick to it:

  • Don't aim too high with your goals - start with small, achievable ones that keep you motivated
  • Ask someone to help you create and stick to your budget
  • Give your budget some flexibility
  • Allow for 'unexpected expenses'
  • Include some rewards to keep you motivated
  • Make a list of things that need to be paid for or bought on payday and stick to it
  • Learn to say 'NO' - if you can't afford it don't buy it
  • Before you buy stuff, shop around and compare prices
  • Pay your rent and utilities before spending money on anything else
  • A debt doesn't have to paid back all at once - make a plan with the loan company to pay it off at a reasonable rate every week or fortnight. See the 'Managing debt' page in this section for more information.

How much money can I save?

You save money if you have more money coming in than going out.

A budget, shows exactly where your money's coming from and where you're spending it. Your budget may also show you where to cut your spending and save more.

If you want to save more money, you have to reduce your expenses (new window). When you think about your next purchase, consider if it's something you really need or if it's just something you just really want.

You may consider increasing your income through extra part-time work, upgrading your skills so you can go for a promotion and salary increase or starting your own business.

Take this online quiz (new window) to see if you're likely to succeed at your savings plan.

Why do budgets often fail?

Budgets often fail because people set unrealistic goals. You don't have to go without all the luxuries in life. In fact, if you want your budget to be successful, make sure you still give yourself the occasional treat.

If you take lunch to work, allow yourself to buy lunch once a week or once a fortnight. Don't give up going to movies - just go on the cheap nights. Use your imagination to find ways to save money.

Working out the right budget will always take fine-tuning. Sometimes you'll underestimate what things cost, or have to allow for an emergency. It's all about finding the right balance.

Monitor your budget for a few months and then revisit it once a year to check you're on track.

Getting help

If you're in dire financial straits, you can talk to a financial counsellor (new window) and get free advice from a professional financial planner to create a budget that will work for you.

Links for budgeting

Financial Information Delivered Online (FIDO)
The Australian Securities Investment Commission (ASIC) provides tips and advice about budgeting.

Dollars and Sense
Great resources to help you budget.

Commonwealth Financial Counselling Program
Department of Families, Community Services and Indigenous Affairs provides free financial counselling services for people experiencing financial difficulty. Find providers in Victoria.

Money Manager - Tools for planning your finances
Tools to help you create and stick to a budget.