“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 only encourage our users to spend when they need to and because our aim is to increase the financial well-being of our entire community, budgeting is really important to us.
We know that it can feel intimidating and overwhelming (kind of like accepting that job offer last week) to think about money, let alone actually starting 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 5 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 an excel spreadsheet, a diary or even an app (hot tip: the Beforepay app has a tool to help create a tailored budget just for you). 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 all expenses and determine your income from the last 3 months.It’s important to create a list of all your expenses over one month, this can be done by categorising your money into sections i.e. bills, groceries, entertainment, transportation, etc. (Don’t forget: The Beforepay app budgeting tool can do this for you). Next look at your income, what is your monthly take-home pay after taxes?
Understanding your expenses and income will help assess what money you have coming through and what you frequently spend on each month (don’t worry if you notice the ten UberEats deliveries in a month...We’ve all been there and this is why you’re here, learning how to budget better).
Let’s use our mate Bill as an example of how you can understand your income and expenses;
Bill receives $4000 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 total to $4000 per month, which means he can allocate $1000 to his miscellaneous and entertainment expenses. Bill can spend roughly $250 a week this month on #TreatYoself moments, i.e. 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.
Whilst there are a few budgeting plan options out there, we’ve done some research for you and our recommendation is the popular “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, our mate Bill earns $5000 per month after tax. He would put away $2500 for the absolute essentials (rent, groceries, bills), $1000 for savings and $1500 for anything else (after work pub drinks or tickets to the cricket).
Again, choose your budget plan wisely and based on what you want/need.
Step 3. Set a goal or goals.
To stay on track with your finances, we suggest having a goal to 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 (unlike your house plant searching for sunlight and water).
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.
Step 4. Follow your plan, but also adapt if you need to.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 and you might find yourself spending more than you’re saving (no “shame spending” here).
At Beforepay, we’re here to make budgeting fun and hope you look forward to managing your money every month. We know that budgeting, tracking expenses and saving will look different for everyone, but as long as you follow our five easy steps you should 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 our Terms of Service and the Terms and Conditions of our Pay Advance carefully before deciding whether to use any of our services.