How to Budget: A Guide To Tracking Your Money & Financial Goal Setting

Daniel Brown

Financial ExpertUpdated on June 19, 2023

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Budgeting is a must for anyone who wants to get ahead with their finances.

A budget gives your hard-earned dollars a specific purpose and sets spending limitations so you can achieve a net positive growth financially.

But if you’ve ever tried budgeting and only stuck to it for two weeks or found it wasn’t getting you anywhere, chances are you need a new method!

Jump straight to…

What is A Budget?

A budget is a spending plan that takes into account both income and expenses. In other words, it’s an estimate of how much money you’ll make and spend over a specific period, such as a month or a year.

Budgeting helps you maximise your earnings, limit spending, and gain clarity on your finances. Ultimately, it allows you to achieve your financial goals.

Some people prefer to write their budgets on paper, while others use a spreadsheet or budgeting app. There is no right or wrong method in creating a budget; what works for one person may not work for you.

Who Needs a Budget?

Budgeting is an evergreen necessity for everyone, but the benefits of budgeting have a more significant impact on your money under specific circumstances. You might need to have a budget if:

1. You’ve Never Tried Budgeting Before

Budgeting will help you review aspects of your expenses you’ve never noticed before. This way, you can clearly assess your spending patterns, helping you stabilise or improve your financial health.

2. You’re Not Able to Save

If you find yourself setting savings goals only to not reach them, budgeting could help. You’ll need to find a way to raise your income, lower your spending or a combination of the two, and budgeting may help you do just that.

3. You Can’t Seem to Keep Up With Your Lifestyle

Many underpaid people feel pressured to live a similar lifestyle with their peer groups.

If you’re spending one too many Friday nights with friends while putting up with a dismal savings balance, it might be time to re-evaluate your lifestyle through budgeting.

4. You Have Irregular Income

Whether you work on commission or your employment is highly dependent on a niche market, or you’re in the gig economy game, you might have a more volatile income than a salaried employee.

5. You’re Going Through a Significant Life Transition

If you are getting married, divorced, having children, or changing jobs, you will certainly be confronting new financial realities.

3 Types of Personal Budgets

Sticking with a budget may be the oldest trick in the book, but it works.

Not everyone finds success with the same budget. Budgeting is highly personal, which is why there are various budgeting types to fit your unique personality and needs.

Here are three common types of personal budgets:

1. Zero-Based Budget

The Zero-Based Budget’s goal is that your total monthly income minus monthly expenses should equal zero. If you earn $5,000 per month, your savings, investments, debt payments and other daily expenses should also add up to $5000. This way, every dollar you earn has a purpose.

Following a zero-based budget takes a significant amount of time. You must thoroughly and routinely monitor your expenditures to track every penny.

Zero-Based Budget Example:

Monthly Income Monthly Expenses
Salary $6000 Rent $1800
Bills $1300
Groceries $800
Debts/Loans $600
Entertainment $500
Savings $1000
Total $6000 Total $6000

2. 50/30/20 Budget

The 50/30/20 budgeting approach is simple. The goal is to categorise your costs into three groups:

  1. Fixed Expenses (utilities, rent, groceries etc.) = 50%
  2. Discretionary expenses (shopping, entertainment, night outs, etc.) = 30%
  3. Debt repayment and savings = 20%

This budgeting approach is ideal for inexperienced budgeters since it does not need a precise recording of all your spending. You can stick to this budget as long as you understand what constitutes a want vs. a need and allocate adequate funds to savings and debt.

The primary disadvantage is that the 20% guideline may be challenging for those with large debt or who want more significant savings.

But don’t get hung up on the exact 50/30/20 ratio. Adapt the concept to your specific situation to get the most out of it.

50/30/20 Budget Example:

Monthly Income Monthly Expenses
Salary $6000 Rent $1500
Bills $800
Groceries $700
Entertainment $1800
Debts/Loans $300
Savings $900
Total $6000 Total $6000

3. The Goal-Based Budget

Goal-based budgeting is a short-term budget designed to help you meet a particular financial objective.

If your car broke down and you need to save money for the deposit on a new one, you can allocate your budget to afford it. Perhaps you’re putting money down for your big wedding day. All the money you’re receiving in the short term should go towards this objective.

You may even have to make compromises in other areas of your budget to reach this objective. It’s useful for short-term planning but not long-term budgeting. This is since your spending and saving habits will most likely be realigned to meet your new objective.

Helpful Tips to Stick to Your Budget

Maintaining a budget is far more difficult than starting one. Here are some time-tested tips to help you accomplish your financial planning to completion:

1. Avoid Impulse Decisions

If you’re itching to purchase a new phone or some clothes, don’t buy straight away. Think about it for 48 hours and if you’re still thinking about it, then you can revisit the purchase.

While self-rewards are vital, buying material goods (especially big-ticket ones) can slow or stagnate your financial growth significantly. If the week passes by and the purchase slipped your mind entirely, that’s an excellent sign that you didn’t truly need it.

2. Find Someone Who Can Keep You Accountable and Budget Together

Accountability and focus are two of the most important characteristics to develop when maintaining a budget. This is when having an accountability partner comes in handy.

An accountability partner is someone you can rely on to inspire you, keep you focused and provide you with feedback when you’re spending way out of line. Consider getting strict on budgeting with your partner, friend, or a parent to keep you accountable.

3. Automate When and Where You Can

Taking as many decisions out of your own hands as much as possible is a simple and straightforward budgeting strategy.

Automate your savings with a direct transfer from your bank account, and plan your online bill payments to stay on track with debt repayment.

How Often Should You Review Your Budget?

A budget review means looking closely at how well your budget is working for you and seeing if your spending limits are practical for your needs.

Reflecting on your budget’s performance this month and using your insights to form next month’s budget is ideal.

Furthermore, consider sitting down, reviewing your entire budget and re-assessing financial goals at least once a year.

How to Budget on a Low Income

Earning a lower income than average can make it tough to budget and save. This means you’ll have to re-adjust your budgeting plan to fit your needs and still achieve positive growth.

1. Start By Writing Down Your Budget

Firstly, you must determine how much money you have and what typical fixed costs you’re paying each month (rent, utilities, debts, etc.). Use this information to write down a budget.

When you have limited cash flow, it’s critical to check your bank statements regularly and budget appropriately. This ensures you have enough to pay your necessities, such as rent and utilities.

Once you pay for the fixed expenses, whatever extra you have left should prioritise savings over more discretionary expenses like entertainment.

2. Maximise Government Financial Support

If you have a low income, you may be eligible for financial assistance from government agencies. Centrelink provides a low income Health Care Card that provides discounts on public transportation and medicines for eligible recipients.

3. Track How Much You Spend

Knowing exactly how much you pay for goods allows you to shop around for better prices.

Go through your bank statements and find places you can cut down.

4. Keep Your Expectations in Check

As you work towards budgeting on a low-income, you’ll need to make plenty of sacrifices. However, remember that sacrifice does not equate to compromise.

Money management and budgeting is a huge part of giving your life a makeover. It isn’t a one-time event but a series of sound and informed decisions that gradually lead to life-long satisfaction.

Budgeting Apps and Resources That Can Help You Save

If you want to start your journey but don’t know what to do, don’t worry! There are countless tools and mobile apps out there to guide you every step. In this list below, we compiled a list of recommended apps for specific functions.

For Tracking Your Spending:

  • Pocketbook

Pocketbook syncs with your bank account (with your permission), listing every purchase you make with your account and sorting it into categories automatically.

When you categorise your daily expenditures, you can readily identify where most of your money goes and where you might need to cut back. This software has received over 350,000 downloads and a 4.3 rating from the Apple App Store, indicating high popularity with Australian savers.

For Budgeting:

  • Goodbudget

Goodbudget helps you establish monthly spend limitations for food, coffee and shopping. Goodbudget shows all of your expenditures in cool-looking pie charts to help make budgeting more appealing. Goodbudget also syncs with your bank accounts.

  • MoneySmart

MoneySmart’s Budget Planner helps you establish how much you are spending on a number of different lifestyle areas and can help you determine how much you can afford to save. It’s also easily adjustable if your salary changes or you get a better deal on your car insurance.

What if you could tap into the wisdom of an experienced financial adviser instead of taking the all too common ‘hit-and-hope’ approach?  

Many people may be unaware of this…but just like you, 41% of Aussies intend to get financial advice rather than going it alone, according to an Australian Securities and Investments Commission (ASIC) report.

Find the right Financial Adviser for you with the help of My Money Sorted. 

When you book a call with MMS, you’ll:

✓ get a better understanding of your money matters

✓ have an idea of the experts you can call on to help you reach your goals

✓ be matched with the right financial adviser who can help simplify your family’s journey to financial wellness  

My Money Sorted is your stress-free pathway to getting ahead with your money.

Here’s what your journey will look like:

Step 1: Start off with a quick money matters session with your My Money Sorted

Step 2: Get matched with a licensed Finance Adviser that’s right for your money situation

Step 3: Take the first step towards your money goals with a clear and sound roadmap prepared by an experienced Financial Adviser

It’s that easy!


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