How to budget

How to make a budget

Budgeting begins with having realistic goals and understanding your monthly income. Once you have a clear picture of your finances, you can categorise your expenses.

Here’s how to get started:

1. Calculate your monthly income

For most of us, this is a matter of checking our payslip and seeing what we get paid after tax and super.

It’s trickier if you’re a contractor or self-employed, or if your income varies from month to month. Use your last tax return and work out your weekly net income (after business expenses, GST and PAYG).

Do you have any other sources of income - interest from investments, government contributions or child support payments? Work out what they average week to week, then add this in too.

2. List all your expenses

It can be easy to underestimate how much you spend on a day-to-day basis. Grouping your expenses into categories can make it easier to visualise where your money goes. Here’s one way you can organise your spending into the following categories:

• Housing costs: Home loan repayments or rent, home repairs, insurance, rates, mobile and internet plans, and utilities like gas, electricity, and water.
• Food and drink: Groceries, takeaway, eating out, coffees and snacks.
• Personal grooming: Clothes, shoes, accessories, and grooming products.
• Transport costs: Petrol, parking, public transport, and tolls.
• Insurance: Premiums for insurances, including health, life, car, and travel.
• Health and wellbeing: Doctor and dentist appointments, new glasses, or medications.
• Leisure and entertainment: Streaming subscriptions, weekends away, movies and gifts for special occasions.
• Debt: Repayments for personal loans, credit cards, store cards and other loans.
• Unplanned expenses: This could include a new fridge or major car repairs. Learn how to build an emergency fund  to cover these bigger, unexpected costs.

You can use our budget planning calculator to help you work out your budget.

3. Split expenses into needs and wants

Once you’ve worked out what your expenses are, separate them into ‘needs’ and ‘wants’. Your ‘needs’ can be expenses like rent and groceries. The ‘wants’ can be the non-essentials like leisure and entertainment. This is a great exercise to help you determine and prioritise where your money ought to go and what you can cut back on to save more.

4. Find ways to cut costs

Finding ways to pay less for expenses will take a bit of time and research, but the savings could be worth the extra effort. Here’s some ways you can cut costs:

• Compare your service providers: Get quotes and compare your gas, electricity, water, mobile and internet providers with other service providers as this might be a good way to cut costs on essential services. Keep an eye on promotional offers that might help you save even more.
• Frequency of insurance premiums: Your health, life, car, and travel insurance may be paid yearly or monthly. It’s a great idea to compare multiple quotes to ensure you get the best coverage for the best price. Paying your insurance premiums yearly instead of monthly might also work out cheaper.
• Be mindful of your debt: Make sure to include repayments for personal loans, credit cards, store cards and other loans, and the interest that comes with them into your budget. Learn more about how to pay off your debt.

5. Set saving goals

What are you saving for? Maybe it’s a short-term goal, like a holiday. Or perhaps you’re saving for something significant, like your first home. Regardless of how big or small, having a goal in mind will make it easier to stick to your budget.

An easy way to set and track your savings goal is by using My Goals in the NAB app. With My Goals you can add your savings goal to your NAB savings account and track your progress towards meeting it.

Explore our savings accounts today.

6. Track and review your budget regularly

To stay on top of your finances you’ll need to review your budget regularly and check in to see if you’re sticking to it.

Another tool that you can use is the Spending tool in the NAB app. Spending is an expense tracker that helps you track your expenses and organise your money.

Setting goals and tracking your expenses is a great way to understand where your money is going so you can save more. You can get started today by opening a NAB Classic Banking account.

This breakdown won’t work for everyone, and you have the freedom to change the percentages to make it work for you. Learn how to use the bucketing method of budgeting to save money.

If you’re spending more than you earn, focus on paying down any debts and cutting costs, or look for ways to increase your income. Reach out to us if you need financial assistance.