Budgeting is simply an assessment of your income and your expenditure - and is the first essential step in setting easily attainable financial goals [that is, determine your current situation regarding your finances].

And the simple rule of managing a household budget is that you need to earn more money than you spend. If you don’t, you either need to earn MORE money, or spend LESS.


The key here is to know exactly how much money you’ve got coming in and where it all goes – so you need to be informed. Only then can you look at HOW you can manage your budget better. Keep reading to find out how.

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Assessing your income

The first step in preparing a personal budget is to know how much money you’ve got to start with – your income.

Income is what money comes in the door and could be from your usual job (either as a salary, or a wage), welfare payments, child payments or returns on investments.

So what is YOUR weekly income after tax? You can get this from your payslip or by adding up the inputs into your bank account.

Be careful you don't overestimate your income if it includes penalty rates or overtime, in fact you’re better off UNDER-estimating your income for your budget so any penalty rates or overtime become a nice little bonus!

And if you’re preparing a household budget, also include your partner’s income.

Assessing your expenses

This is a little harder, but it is important to be as realistic as possible when estimating your expenses. In fact it is better to OVER-estimate your expenses for your budget so you have a nice little bonus if you don’t spend your full budget allocation for a particular expense.

Some expenses are fixed (they more or less the same every week or month, such as insurance premiums), but others such as groceries will vary from week to week depending on what you use.

It may be worthwhile going through your credit card and bank statements for the last few months to see exactly where your money is going. Or use the Expense Record in the ToolBOX [under “Financial Tools”] to keep track of expenses if you tend to use cash.

Also, don't forget about the yearly bills such as land tax/ rates and car registration. These are often big bills, but must be allowed for in your expenses.

To make it easier to tally your expenses, convert all your expenses to a weekly cost. For example, if your yearly car registration bill is $520, divide this by 52 to get $10 per week.

By doing this for ALL of your expenses, you will be able to see exactly how much you are spending on average every week. Are your weekly expenses more than your weekly income? If so, you really need to cut some expenses and BUDGET.

Or are your weekly expenses less than your weekly income? In which case, where does all this extra money go?

Now start budgeting

By preparing a budget, you can make better use of the money you already get – so you may not need to earn more money after all!

From your weekly income you know how much money you can spend, and from scrutinizing your expenses you should now have an idea of what expenses you can cut and where you can save some money. Use this information to set yourself expenditure targets – and stick to them! You’ll be surprised how quickly your savings start to improve.

And as part of your budget, allow for extra debt repayment and contributions to a saving plan, as well as future contributions to an investment.

There is a budgeting worksheet in the ToolBOX to help you achieve your financial goals. Or check out our sister site Your Money and Finance.

Or if your computer skills are better than your maths, then try one of the personal budget software packages available.

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