Whether you’re feeling financially secure, or are in a more challenging situation, taking the time to sort out a budget to help manage your money can ensure you’re ready for whatever life throws at you next.

Essentially, a budget will help you answer three questions:

  1. Do I spend more than I earn?
  2. What can I afford to spend?
  3. How can I reach my financial goals?

This seven-point plan will help you take control of your finances and make sure you’re as prepared as possible, no matter what happens.


1. Work out what you spend

Before you can plan your budget, you need to know where you stand. The best way to do this is to understand exactly what you’re spending each month.

Reviewing just one month’s spending is unlikely to give a true picture, so it’s a good idea to sit down with three months of bank statements and group your outgoings into categories like:

  • accommodation
  • transport
  • groceries
  • bills
  • entertainment
  • debt repayments
  • savings

To get an accurate picture of your monthly spend it’s important to include less regular outgoings too, like electricity or car insurance payments. Split quarterly expenses out over three months and annual expenses over 12 to give a clear picture of your average monthly outgoings.


2. Find the difference

Once you know what you’re spending, the next step is to compare it to your monthly income. The figure to compare here is the post-tax figure paid into your bank account, rather than the pre-tax amount.

Calculating the difference between your income and expenditure can be very revealing and not always in a positive way. However, it’s a really important step in taking control of your budget. Once you know the difference, it will help you to identify whether you’re running in the black or the red, understand the size of the problem, or help ramp up your savings.


3. Size up your buffer

It’s generally recommended that you aim for between three and six months’ worth of expenses saved to ensure you’re prepared for any disruption. After calculating your average monthly expenses, it should be easy to work out how much money you need to survive six months without any income.

Ideally, your buffer should be held separately from your day-to-day account so you’re not tempted to spend it on everyday things, but easily accessible if needed. A savings account like the Qudos Bonus Saver is a great way to keep your buffer separate while also earning interest on your balance.


4. Set your goals

Once you’ve found out what you’re spending and what you should have in your ‘rainy day’ fund, it’s time to set some financial goals. These goals could be paying off a credit card, building up your buffer or saving an amount each month towards your future. Or, if you’re less financially secure at the moment, it could be just ensuring that you’re able to meet your financial obligations each month.

Like any good goal, your financial goals should be SMART – specific, measurable, attainable, relevant and timely. When setting a goal, write down exactly what you are going to do and the timescale that you want to do it in – this then becomes crucial to your planning.


5. Make a budget plan

Once you have a goal, it’s time to set a budget plan. A great way to do this is a monthly budget, which can then be further broken down into weekly budgets to make it easier to manage and track.

When making your budget plan, start by listing your non-negotiables - the expenses required to put food on the table and a roof over your head. Again, remember to include less frequent outgoings like electricity bills, insurance, etc. split out across each month.

Then add in your other expenses, keeping them realistic based on your actual spending habits.

Once you have your basic budget, compare it with your monthly goal to see it affects the plan. You may find that to achieve your financial goals you need to change some expenses to stay on track.


6. See where you can make savings

The next step in the process is to see where there are opportunities to make savings. Even small savings can add up over time to make a big difference.

  • Re-examine your providers – utility and insurance companies often increase premiums over time. Comparison websites make it easy to check whether you’re getting the best deal and can result in hundreds of dollars saved.
  • Reduce interest where possible – consolidating debts involves rolling several debts into a single loan with a lower interest rate. It can be a good way to take back control and reduce monthly payments.
  • Trim non-essentials – multiple online media subscriptions, unused gym memberships and morning coffee runs can all add up – especially if you total them up over a whole year. It’s worth looking at your non-essential spending and seeing what you can live without. Putting up with Spotify ads, using your park’s pull-up bar and buying an Aeropress coffee maker could mean you have an extra couple of thousand dollars per year to put towards your financial goal.
  • Meal prepping - being organised with a weekly meal plan is a great way to ensure that you only spend money on the food that you need, rather than being distracted by impulse buys.


7. Build healthy financial habits

While motivation may get you started, it’s building habits that will keep you going. Regularly reviewing how you’re tracking against your plan will keep you motivated and mean you’re more likely to stay on course. Seeing your balance grow, or even just staying within your spending limits, is a great feeling - especially if budgeting is new for you.

If you’ve been disciplined with budgeting and cutting costs, it can be a good idea to reward yourself with a treat. This doesn’t need to be expensive – even something small to mark a milestone can make budgeting more satisfying and mean you’re more likely to work towards the next.

Life can be unpredictable, and we don’t always have control over how it will affect our finances. However, following these tips will ensure you’re doing everything you can to be in the best possible position for whatever comes next.

If you would like to discuss your individual financial circumstances, then contact us.


Qudos Mutual Limited trading as Qudos Bank ABN 53 087 650 557 AFSL/Australian Credit Licence 238 305. The information in this article is of a general nature and has been prepared without considering your objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances.

Before opening an account with us, you should read our Terms and Conditions for Savings Accounts and Payment Services and Financial Services Guide.

Published June 2020