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A good budget will show you if you're spending more or less than you can afford, so you can stay on top of your bills and start putting money towards any future goals.

Setting up a budget doesn't need to be difficult - just follow our step-by-step guide.

1. Note your current income – work out what your weekly income is. Don’t forget to include any significant interest you earn on your investments or savings.


2. Work out your expenses –
you need to make a list of all your regular outgoings. A simple way to do this is to look at your transaction and credit card statement and track your expenses for a month. Don’t forget to allow for the less regular outgoings such as utility bills, annual insurance payments or your car registration. Once you've worked out your expenses, divide them into two categories - fixed and variable. Fixed expenses are the ones that stay relatively the same each month, such as your mortgage or rent. Variable expenses are those that can change, like groceries, petrol and entertainment. The variable category is important as it's where you'll most likely be able to make adjustments.


3. Do the maths 
– now that you know your income and expenditure, you need to subtract what’s going out from what’s coming in. If you've got money left over, you're on the right track. If you've got more money going out than you've got coming in, the next step is to look at where you can make adjustments.


Your aim should be to have more money coming in than going out and to have enough to save for short and long term goals. It's also a good idea to put some aside for the unexpected in an emergency fund.
 

If you’ve got more going out than coming in, start by looking at your variable expenses. There might be some obvious areas where you can cut back such as eating out or using the car less to cut down on petrol. Other savings might take a bit more planning such as finding a phone or broadband plan that’s better suited to your needs.

Here are some handy tips on adjusting your budget:

  • Be realistic about what you can cut back on – giving up your morning coffee is much more sustainable than cutting your entertainment budget to nothing.
  • Pay off credit cards, store cards and loans before you start saving – these kinds of debt usually have higher interest rates than any interest you would make on savings.
  • Make sure you’re getting the best deal – consider switching to a credit card with a lower interest rate, or consolidate all your card debts into one personal loan.
  • Get saving – if you’ve got more money coming in than going out, it’s time to start saving. Even if you’re only saving a small amount, chances are you’ll feel motivated to save more when you see your balance starting to grow.
  • Track your progress.
Things you should know

Westpac Financial Planning FSG (PDF 107KB)

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