3 simple steps to create a budget

Nearly two out of five Aussies believe budgeting is too much effort, but these quick tips could make it a simpler task.

Nearly two out of five Aussies believe budgeting is too much effort, but these quick tips could make it a simpler task.

Around 75% of Aussies will be going into 2018 with no specified budget, according to a survey by AMP, which—reality check—is probably going to make achieving financial goals, whether it’s getting out of debt, going on that long-overdue holiday, or saving for something big, a little tricky.

Despite our reliance on smart phones, another interesting finding was that of those people that did have a bit of a budget in place, many said they tracked it via their bank account, a spreadsheet or by putting pen to paper, with few people saying they tapped into an app to simplify the process.

With that in mind, we’ve pulled together some stats, simple steps and useful apps to hopefully make managing your cash and budget a little easier over the year ahead.

Where are Aussies at with their budgeting?

According to research by AMP, here’s what survey respondents said:

  • 34% believe budgeting is too much effort
  • 19% say budgeting takes too much time
  • 27% who sit down and create an initial budget won’t end up sticking to it.

Ways to make your cash go further

Knowing what you earn, what cash is required for the mandatory stuff, and what dough you’d like to have left over to do the things you enjoy, are the cornerstones to creating the right budget for you.

It may help you to see where there’s room for movement and where (hopefully!) savings can be made.

1.     Figure out what money is coming in

Firstly, check out your ‘net’ pay. This is what you earn after your employer puts some of your earnings into super (depending on your employment situation), and income tax is taken out.

In other words, it’s what money is left over. And, keep in mind, the money you earn before and after tax can be quite different, so it’s a good idea to know exactly what you end up with.

Remember to also include any other sources of money you might have access to, such as government assistance, interest on savings, or earnings on investments.

2.     Work out what must be paid

Once you know what money you have access to, you’ll then need to work out your mandatory expenses. These are those things that you more than likely need to pay in order to get by.

They might include:

  • Your rent or mortgage
  • Groceries
  • Public transport and vehicle costs (petrol, tolls, insurance, rego)
  • Bills (gas, electricity, water, council rates, strata, internet, mobile)
  • Medical and dental expenses
  • Existing repayments (credit cards, education debt, personal or car loans).

If you get to this point and think realistically there isn’t much left to play around with, you could look into whether there are any potential ways of cutting back.

For instance, could you move somewhere cheaper, reduce what your spending on food, or ring a different provider to see if you can get a better deal on your phone, internet or energy bills?

3.     Consider what things you want to have money left over for

When you’ve put money toward the roof over your head and the food in your belly, next, you’ll want to think about what money is left over for life’s little luxuries.

They might include:

  • Pay TV
  • Gym membership
  • Hair and beauty
  • Ubers and taxis
  • Takeaway food
  • Nights out
  • Weekends away / holidays.

If you don’t have enough cash on hand for all the things on your luxury list, that’s when you may need to think about what’s most important to you and prioritise.

Where technology can help

Once you’ve formulated a bit of a plan around how you’ll budget and maybe put a little money aside on a regular basis, keeping track of things can still be a bit tricky.

Michael Christofides, Director of Retail Solutions at AMP Bank, said Aussies don’t need to be spending time hunched over excel spreadsheets to create workable budgets, particularly when there are apps and smart bank accounts available that can do the work for you with far greater accuracy.

A few examples available to Aussies include:

  • Splitwise - a free app which helps you track bills and other shared expenses with friends, family and roommates to ensure everyone gets paid back what they’re owed
  • ATO - a free app which allows you to lodge and track your tax return, expenses and deductions, such as car trips and client coffees to ensure you get the most back at tax time
  • Bett3r - linked to the AMP Bett3r account, helps you automatically pay bills, save, and know what's left to spend, so you have greater visibility around where your money goes.

Looking for more info?

Another way you might be able to track your money more easily is with My AMP, which gives you the ability to view all of your AMP and non-AMP accounts in one place, and at the same time categorise your transactions, so you can see where your money is going.

In the meantime, if you or someone you know are feeling the pinch financially, you can also talk to a financial counsellor at the National Debt Helpline free of charge by calling 1800 007 007. 

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© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.