4 Steps you need in your life for building a budget
“I don’t need a budget” - said literally no one ever.
If you’re reading this (thanks and go you!) then you’re probably ready to start your journey to financial freedom and build a budget. Budgeting is an incredibly important tool for getting your finances in order, whether you’re struggling with your money management or trying to save for something big.
We know that it can feel intimidating and overwhelming to think about money, let alone actually start a budget. And taking the first step can sometimes feel like the hardest part!
But don’t worry, we’re here to help. Just follow our 4 easy steps to get started.
Step 1. Figure out which budgeting method will work for you
There are so many methods of budgeting these days and there is no right or wrong way on how you want to stay on track with your finances. You can use a spreadsheet, a diary or even an app.
The Beforepay app includes a free budgeting tool that creates a bespoke budget tailored to you and your lifestyle,
Whichever method you choose, just make sure it’s the right one for you and that you’ll be motivated to stick with it.
Step 2. Make a list of your expenses against your monthly income and create a budgeting plan
Create a list of all your expenses over one month by categorising your transactions into sections i.e. bills, groceries, entertainment, transportation, etc. You can use the budgeting or spending insights tools in the Beforepay app to help you with this!
Then look at your income and your monthly take-home pay after taxes.
Assessing what money you have coming through and what you frequently spend on each month can help you estimate and plan ahead when creating your budget.
Let’s use our mate, Bill, as an example.
Bill receives $5000 per month after tax (how good!).
At the start of each month, Bill categorises his expenses into rent, bills, groceries, personal, savings, miscellaneous and entertainment.
Bill knows that his rent, bills, groceries, savings and personal expenses add up to roughly $4000 per month, which means he can allocate $1000 to his miscellaneous and entertainment expenses. So Bill can spend roughly $250 a week each month on #TreatYoSelf moments, like hanging out with mates at the pub or buying that awesome jacket that he’s been eyeing for months!
Understanding how your money moves is really important because it allows you to spend your money without worrying. You can then use this to create your budgeting plan.
Whilst there are a few budgeting plan options out there, we’ve done some research, and one strategy you can try is the “50-20-30 budget plan”. The 50-20-30 budget plan is a popular money management technique that splits your pay into three sections: 50% for the absolute needs, 20% for savings and 30% for the treat yourself moments or anything else.
For example, if Bill were to use this method, he would put away $2500 for the absolute essentials (rent, groceries, bills), $1000 for savings and $1500 for anything else (dinner with mates or tickets to the cricket).
Again, choose your budget plan wisely and based on what you want/need.
Step 3. Set a finance goal (or goals)
To stay on track with your finances, having a goal can help keep you motivated. Your goal can be anything from saving a house deposit to sticking to a regular budget to help with rent flow. Whatever your goal is, it just has to be maintained and cared for, like a house plant!
If you need help thinking of a goal, here is a list of eight examples:
- House deposit - are you dreaming of becoming a first home buyer?
- Pay off a mortgage - are you a first home buyer?
- First car - maybe you need a car for work?
- Fun holiday - it’s time to relax.
- Christmas gifts - always good to plan ahead.
- New couch - maybe you’re due for some stain-free furniture.
- Pet - everyone needs a furry friend?
- Medical emergency - it’s always good to plan ahead.
It’s important to think about your current situation and what you would like to improve in your life. Maybe your goal is right in front of you (saving for a new computer or phone).
Step 4. Follow your budgeting plan, but also adapt if you need
We understand how important it is to budget, but we also know how hard it can be to start and even maintain. Some months will be harder to stay on track than others, and there might be some emergency expenses to cover that you didn’t expect (did you make a budgeting bucket for emergency expenses?).
Make sure to monitor your spending, and if you are going to spend a bit more on groceries or need to buy a Nintendo Switch for Kelly’s upcoming birthday, then reflect that in your budget.
Budgeting at first can be intimidating; it can even be scary, especially when spending is so much easier to do with technology these days. But as long as you have a plan and you're consistent, you'll get the hang of it and won't even have to give it a second thought after some time.
At Beforepay, we’re here to make budgeting fun and take the stress out of managing your finances. We know that budgeting, tracking your expenses, and saving will look different for everyone, but as long as you follow our easy steps you'll be able to find the right budgeting rhythm for you.
Don’t forget, you can also download the Beforepay app to unlock our budgeting and spending tools designed to help you stay on track with your finances.
Disclaimer: Beforepay Group Ltd, ABN: 63 6933 925 505. Beforepay allows eligible customers to access their pay and provides budgeting tools. Beforepay does not provide financial products, financial advice or credit products. The views provided in this article include factual information and the personal opinions of relevant Beforepay staff and do not constitute financial advice. Please read the Terms of Service of our Pay Advance carefully before deciding whether to use any of our services.