BUDGETING

There are many benefits to good money management, including lower anxiety, better relationships and better overall well-being. Creating a budget is the first step to taking control of your finances and developing good money habits.

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Why do a budget?

Completing a budget is a good way to improve your financial wellbeing. There are three main components.

  1. Understanding your income
  2. Understanding your spending
  3. Planning for regular and irregular spending

Understanding your income is probably going to be the easiest part. Your payslips will be invaluable. If you receive additional allowances from time to time, but these are uncertain, it would be best to leave these out of your budget.

Checking your payslips also helps you make sure that the money coming in is correct (for example, all allowances are being paid and that you are not being overpaid). Overpayments sometimes happen and when they do, the overpaid funds must be repaid, creating a temporary debt and reduction in pay. 

For understanding your spending, it helps to write down everything you spend for a couple of weeks or a month for more accuracy. Your bank and credit card statements, bills and receipts will also be an invaluable source of information. Be honest with yourself about everything you spend. It’s impossible to budget accurately and usefully otherwise.

Once you understand your income and expenditure and have completed a budget you have the information you need to manage your finances. This may include planning to stay on top of your bills and considering your priorities for discretionary spending, setting goals and structuring your banking to help you maintain visibility and control and perhaps earn a little extra interest on your savings.

Budget Calculator

The easiest way to do a budget is with a budgeting tool, like our budget calculator. Complete online or download the Excel version to complete on your own device. The first time you do a budget, expect to spend a bit of time getting it right. Choose a time you’re less likely to be interrupted so you can focus.

BUDGET CALCULATOR

How to do a budget?

You can prepare a budget for any period of time; a fortnight, a month, a year. We suggest initially budgeting for a whole year, so that you capture expenses you pay less frequently, like utilities, car rego and insurances. Completing an annual budget also helps you better manage variable expenses. For example, your electricity bill may be higher in winter or summer, depending on where you live and how much you rely on heating and cooling.

Tips to help when completing your budget

Refer to your bank statements

Use your bank statements to account for regular income, such as salary, government benefits and investment income; and expenses, such as rent or mortgage, food and other regular outgoings. If you use a credit card, you’ll need to go through your credit card statements as well.

Track your cash spending

Make sure you also track cash spending especially if you are in a habit of withdrawing cash from an ATM or through EFTPOS when you make a purchase. Use a spending tracker app or carry a small notebook and pen with you to record each time you pay for something with cash. When you know what you’re spending cash on, you can add the details to your budget.

Convert to pay periods

When you’ve completed your annual budget, divide each amount by the number of pay periods in a year. For example, ADF members are paid fortnightly so divide each annual income and expense amount by 26. This will let you to clearly see how much you need to put away each pay to meet your expenses. If you are using a budgeting tool it may do this for you.

Surplus or deficit

When you’ve completed your budget, it should show that you either have surplus income or that you are spending more than you earn and are in deficit. Consider whether this reflects your reality. For example, if your budget says you should have a surplus but you haven’t saved any money, then chances are you’ve missed something. If on the other hand it says you’re in deficit but you have no debt, you may have overestimated your expenses or underestimated your income.

It’s not easy getting it right the first time around so be patient and methodical and keep working on it until you have a budget that accurately represents your income and expenses. It’s definitely worth the effort.

Frequently Asked Questions

1Why do I need a budget?
A budget helps you to work out where your money is going. It shows your income versus expenses. You can then make decisions about whether you are spending money on what’s important to you and how much is left over for savings. A great place to start is with a budgeting tool like our budget calculator.
2How do I do a budget?
Start with a budgeting tool like our budget calculator or a free budgeting app. Enter all of your income and expenses for a set period, such as a calendar or financial year. The amount left over is the amount you have available to save. Consider using bank and credit card statements to make sure you capture all expenses, particularly those that are paid less frequently such as utility bills, car rego and insurances.
3What's the right breakdown for my income (e.g. how much should go to expenses, savings, and investments)?
There's no magic formula that works for everyone. Your budget helps you work out where your money is actually going and what your fixed and discretionary expenses are. Start with our budget calculator to see your real income versus expenses. Then you can decide if you're spending money on what's important to you and how much is left over for savings. If you would like to challenge yourself to particular percentages, see what these are in the pie chart in the results section of the calculator and see if you can make adjustments that feel right for you.
4How do I control my spending on entertainment and discretionary items like dining out and drinks?
The first step to getting control is knowing where your money is going. You don't have to kill your daily coffee or night out with friends, but you do need to know what you’re spending on them. Try using cash, EFTPOS or a debit card instead of your credit card when you're out. Check your bank and credit card statements to see where your money really goes. You can't change what you can't see, and small expenses can drain your account faster than you think.
5What's the best budgeting method for someone just starting their first full-time job in the ADF?
Start simple with our budget calculator. You can complete it online or download the Excel version. Your base salary is at the top of your payslip, and if you if you’re not sure about allowances, leave them out for now. Set up a regular budget review date - e.g. when you get paid could work. Budgeting gets easier with practice, and the best budgeting method is the one that works for you. We also recommend having some savings or other goals as motivation.
6How can I set up a budget that goes beyond just having spending and savings accounts?
You're ready to ‘level up’ your money management, and that's great. Set up separate accounts for bills, spending, and savings. Have your pay automatically split between them - we suggest making your savings account the default. Look for accounts without fees that let you set up direct debits. Many banks and credit unions will allow you to have separate accounts or “areas” where you can be really specific about what’s there, it’s a matter of working out what works for you.

Check out these articles to help you get a budget in place

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