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Budgeting to help recover from a financial setback

When faced with a financial setback, it’s important to take stock of what’s changed and how you may need to adjust your financial habits in response.

June 2020 – 4 minute read

Key takeaways from this article:

  • Why budgeting is important
  • Taking stock of what has changed
  • Creating a personalised budget
  • Using your budget to find where you could cut back

Reduce your costs and download the cost-cutting checklist

Build your financial skills and download the managing money guide

Plan for the future and download the budget planner

Man with glasses on a laptop while listening to a podcast about budgeting

When faced with a financial setback, it’s important to take stock of what’s changed and how you may need to adjust your financial habits in response. Here are the steps you can take to help get your finances on track, as well as a handy cost-cutting checklist you can use to find ways you could save, and a budget planner to create your own personalised budget. You can also download our 5 step guide to getting back on track that could help you successfully manage your money.

Why is budgeting important?

Budgeting is an extremely important life skill as it acts as the blueprint for your financial goals. Life is full of the unexpected, and a detailed budget can help you keep you out of debt and working towards your financial and life goals.

Taking stock of what has changed

There are any number of reasons that you might be faced with a financial setback. At this point it will be important to take stock of what has changed and how you may need to change your financial habits in response.

This might include doing a full assessment of where you stand right now, reassessing where you want to land in the future, and then putting together a plan to help you get there.

Creating a personalised budget

A personal budget is often a helpful planning tool. Budgeting:

  • helps you to understand how much money you have available to use now and into the future,
  • reveals where you’re spending most, and
  • identifies whether you may be overspending or whether you may have money left over.

To put together a comprehensive budget for yourself, a good starting point is to identify all the things you currently spend your money on. You might choose to write down everything you spend for a month or perhaps build a list from last months bank statement and receipts. Remember to include any loan repayments or those things that you may only pay for once a year, like car registration or insurances.

Then, compare the amounts you have going out with how much money you have coming in. Any major change in your life may mean changes to your income, which is why it’s a great time to think about what else you may need to adjust. If you identify that you need to reduce some of your expenses then start by prioritising them. Break them down into commitments to others (such as loan repayments, or phone plans), necessary living expenses (such as food, housing, transport, health) and nice-to-have lifestyle expenses (like entertainment, personal services, recreation).

How to make your own budget?

Step 1: Start with your income.

Identify how much money is entering your bank account each month.

Step 2: Calculate your expenses.

Add up how much money you’re spending on rent, groceries, entertainment, and anywhere else.

Step: 3: Set your savings goals.

Set yourself financial goals and decide how much you want to save each month or year.

Step 4: Set a monthly plan.

Now you have your savings goal, calculate how you can achieve it. Identify how you can reduce expenses or find more income.

Step 5) Monitor your budget.

It might be a good idea to print it out and have it on your fridge or desk. Evaluate how well you’re progressing each week or month and make adjustments where necessary.


Here’s a budget planner template you can use to help get you started:

Budget planner (PDF 718KB)

Using your budget to find where you could cut back

Sadly the nice-to-have lifestyle expenses are often the first to be cut, but take a closer look as there may be other things you can reduce that will allow you to continue to enjoy some of the good things in life.

Let’s start with your commitments. List them out showing the amount you owe, how much the repayments are, and what the interest rate is. Consider whether you can reduce those with the highest interest rates, or prioritise them to be repaid first. Check whether you’re making the minimum repayments. Whilst it helps in the long run to be making extra repayments, while cash is short it may be easier to just repay what you must. You may also want to think about consolidating credit card debt, potentially via a balance transfer with low or no interest that you can repay within that initial honeymoon period. Be mindful, that some balance transfers may attract a transfer fee, higher fees for additional purchases, and higher interest rates and fees after the grace period.

Then take a look at your living expenses. Being more mindful of how you use utilities such as internet, electricity and water may help to trim those costs. Food costs may be able to be pared back by having a menu plan that you specifically shop for; by planning your meals around supermarket specials and seasonal fruit and veg; or by making more home-cooked meals rather than buying ready-to-eat or takeaway.


Check out our handy cost-cutting checklist for more ways to save money on regular expenses.

Cost-cutting checklist (PDF 191KB)


Your post financial setback budget may look very different to your previous spending habits, but by taking the time to examine your current position, looking ahead to what the future holds, and planning how to make the best use of your money, you put yourself in a better position to ride out difficult times and make your way to a stronger financial future.


Explore more simple ways you can take charge of your finances with our managing money 5 steps to getting on track guide.

Managing money guide  (PDF 1MB)


Find more great budgeting and money management tips on our Master Your Money pages.

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Things you should know

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice.

© Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.