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.

Budgeting checklist

  • Use our budget calculator or a free budgeting app to make doing a budget easier.
  • Use bank and/or credit card statements to make sure you capture all your expenses
  • Track cash spending so that you can include it in your budget
  • Use separate bank accounts for bills, spending and saving
  • Use your completed budget to allocate savings to financial goals
  • If you think you are spending more than you earn, get help immediately
  • Look for tips on how to save money

Why do a budget?

Completing a budget will show you what you currently spend your money on and how much, if anything, is left over for savings. You can then consider what your priorities are and make decisions about discretionary spending.

A budget lets you see if you are spending more or less than you earn, can help you get on top of bills and show you how much is available to save towards future goals.

Setting some goals so you have a reason to save is a great motivator for completing a budget.

How to do a budget

The easiest way to do a budget is with a budgeting tool, like our budget calculator.  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.

Using bank statements to create 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.

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.

How to make use of your budget

Having completed a budget, you can then decide what to do with the information. Are you happy with how things are looking or do you think there’s room for improvement? Are there enough savings to reach your financial goals, or do you need to reassess your current spending and/or goals?

If you are trying to save money, look for discretionary expenses, like entertainment or personal expenses, you could cut back on. Consider allocating a set amount each pay for personal expenses such as takeaway food and drinks, entertainment, clothing and footwear. This way you still have cash you can spend on these things, but you’ve put a limit on it.

TIP: Don’t make your budget too tight or you probably won’t stick to it.

Use separate bank accounts

When you know how much you need to put away each fortnight to meet all of your expenses, and you’ve set yourself a spending limit, consider opening separate accounts for bills, spending and saving to make it easier to manage your money. You can have your pay split into each account automatically so that you don’t have to think about it.

Don’t be tempted to dip into your bills account just because there’s money left in it or you may not have enough when those bigger, less frequent, bills hit.

It’s a good idea to revisit your budget whenever there are significant changes to your income or expenses, like getting a promotion, having a child or buying a house.

Saving for your goals

Hopefully your budget shows you have a surplus which you can save towards your financial goals. The amount you can save each pay will help you work out which goals are achievable and how long it will take to reach them.

You can estimate how long it will take to reach each goal using MoneySmart’s savings goal calculator. This is an important step because if your timeframe is more than a few years, you might consider investing your savings to achieve better returns and reach your goals faster.

When you’ve worked out how long it will take to reach a financial goal you can decide what sort of investment is suitable for your savings. See our investing money guide for more information on choosing investments.

Tip: Allocate any pay increases to your savings account before you get used to having the extra income. This is a great way to boost savings and reach your goals faster.

If you’re spending more than you earn (a deficit)

If your budget indicates you are spending more than you earn, don’t panic but don’t delay taking action. Check your budget to make sure you’ve got all the amounts right and look at your expenses to see if there are any you could reduce.

If you think your budget is accurate and you can’t see any expenses that you can reasonably reduce, speak to a financial counsellor for help on getting back on track. The sooner you do this the better. Don’t risk falling into, or getting further into, debt. Our guide on problems with debt has some practical tips and information on how to find a financial counsellor.

Budgeting and monitoring services

There are services available to develop, manage and monitor your budget for you, for a fee. Before you take up one of these services, make sure you are aware of all the costs involved and how the service will benefit you. What is it that you think the budgeting service can do for you that some personal discipline cannot?

These sorts of services often claim they can help you save more and/or pay off your loans faster, however their expectations on how much you need to live on may be unrealistic and involve all sorts of sacrifices that no-one could live with. The ‘monitoring service’ may also be a waste of money.

The best way to do a budget is to have a go yourself. If you need help, contact us or get help from a trusted friend who is good with money.


Deployments can be a great opportunity to boost your savings and reach your goals faster. Think about additional deployment income as a windfall rather than treating it as regular income. Otherwise you could get used to having the extra income and struggle to reduce your expenses when your income drops again post deployment.

Our post deployment guide has tips on making the most of deployment income.

Money saving ideas

Financial products and services

Cutting discretionary spending is not the only way to put some dollars back into your budget. Reviewing financial products, like bank accounts and insurances can save you a lot of money, especially if you haven’t done it for a while.

Transaction accounts

If your bank charges account keeping fees, switch to a financial institution that offers a basic bank account with:

  • No account keeping fees
  • Free monthly statements
  • No minimum deposit amounts
  • No overdrawn fees

Savings accounts

Imagine you have $50,000 saved in your bank’s standard savings account, paying interest of 0.2% pa, or about $100 a year in interest. Now imagine you move your money into an online savings account with another financial institution and earn 2% pa. Doesn’t seem like a big difference until you think about it in dollar terms and realise you could have been earning $1,000 a year in interest, 10 times as much.

Search comparison websites now for a better deal on your savings. It’s a very easy way to boost your budget.

Home loans

Lenders don’t usually tell you if there are cheaper home loans available, and why would they? Would you go to your boss and offer to do the same job for less money?

Most home loan interest rates are negotiable, you just have to ask. Use a comparison website to see how your loan stacks up against other loans with similar features. If you find a better rate, ask your lender to match it. If you’re a good customer, chances are they’ll be willing to negotiate. If not, consider switching home loans.

This will require a bit of effort on your part, but could save you thousands of dollars a year.

Personal loans

As personal loans are usually fairly short-term, in comparison to a home loan, it is often not cost effective to switch personal loans. Extra costs to take into account include:

  • Exit fees, also known as break costs or cancellation fees
  • Early repayment fees
  • Administration fees
  • Establishment fees and ongoing fees of the new loan

Find out whether you can repay the loan early without penalty. If you can, your best bet may be to look for savings elsewhere in your budget and use them to pay down personal loans faster. The same goes for any other high-interest loans you may have.

Credit cards

If your credit card has a high interest rate and you don’t pay the balance off at the end of each month, consider switching to a lower rate credit card. A comparison website will identify cheaper options and also alert you to any balance transfer deals. For example, many credit card providers will offer you a very low – or even 0% – interest rate for a set period of time, to switch to them.

Unless you genuinely believe you can pay the card off within the interest-free, or low interest period, only consider switching to a card that has an ongoing interest rate that’s the same or lower than what you currently have. A card that defaults to a higher interest rate after the introductory period could end up costing you more in the long run.

A word of warning: switching cards too often can affect your credit rating.

Insurance policies

When you receive an insurance renewal notice, you need to do two things before you pay it:

  • Pretend to be a new customer – go to your insurer’s website and get a quote as if you were a new customer, more often than not the quote will be cheaper than your renewal notice.
  • Compare other insurers – compare the cost for similar cover with other insurers.

If you do find cheaper cover, and you are happy with your current insurer, ask them to match a cheaper quote. Consider switching insurers if necessary. You might be surprised at how easily this can save you money.

Surf the net

The internet is full of websites, blogs and social media groups dedicated to saving money on all sorts of things. Use some spare time searching for savings tips and tricks you can use to keep a few more dollars in your pocket.


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