Top 5 Tips on creating a budget

Having a budget is something that almost everyone needs, irrespective of your income. The reality of life is that no matter how much money you have almost no-one has an endless pool of money at their disposal. So to ensure that you are not sinking in to debt you need to set a budget. Here are our top 5 tips on setting a budget.

1.    Know how much money you have coming in. Income can come from a variety of sources. These can include wages and bonuses, Centrelink, tax refunds, dividends and interest. Be sure to look through your bank statement for at least a year to see where your money has come from.

2.    Write down all of your expenses. This will take some time in order to be accurate. You will need to include all of your bills as well as living expenses. It is easy to overlook expenses especially if you have items on auto payment or direct debit.

3.    Against both income and expenses be sure to note whether these costs are weekly, monthly etc. You can then break all of these down so that you know exactly what you have to work with. It is often good to look at things on a weekly basis as it stops things getting out of control too quickly.

4.    Without a doubt some of the costs that you put down will have been estimates so here is where you need to try and make things really accurate. For at least one week, preferably one month, write down every single cent that you spend. This may be time consuming but it is really worthwhile.

5.    Now that you have followed our tips there will be a couple of different outcomes. You may be spending more than you earn or spending everything that you earn or you may have a surplus. You need to decide how you are going to deal with the different outcomes.

Be sure to read our follow up story next month on how to resolve a budget deficit ie you are spending more than you are earning.