How to Budget 101: A beginner's guide to saving

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How do you start a budget? Know where to start and create a budgeting plan you can stick to with our Budgeting 101 Guide. Budgeting doesn’t always have to mean saving every dollar you make. In fact, the true markings of a good budget are ones that allow you to enjoy yourself while saving cash to help you achieve your long term goals. 

A budget is essentially a roadmap for where you want your money to go. Start budgeting your money today and get in control of your finances. Avoid common budgeting mistakes, don’t get caught up on bean-counting and set up the perfect budget you can live with. Check out some simple budgeting tips for beginners below and learn how to budget money and save with ease! 

What is a Budget?

Put simply, a budget is a detailed list of your income, what money is coming in and what is going out. Rather than just looking at your bills and necessities, a budget looks at all of your spending - yes everything! That includes social expenses and entertainment, groceries, medical expenses, household necessities and even birthday presents or Christmas gifts. Putting together a personal budget gives you an idea of where your money is going and where you can save.

What are the Benefits of Budgeting?

Why should you budget? Creating a budget will give you a holistic view of your expenses, and allow you to visualise your incomings and outgoings with ease. There is a wide range of benefits to budgeting, including: 

How to get into the Budgeting Mindset

Determine why you need a budget

Need help with budgeting money? Discover what your main savings goal is, and how you can best achieve it. Sit down and write down your financial goals. Maybe you’re saving for a holiday, or just want to have a little extra each month so you aren’t living from pay cheque to pay cheque.

Below are just some of the reasons people decide to track their spending with a monthly budget:

Get a full picture of your spending habits

First, add up all your income so you can see how much you have coming in each month. Make sure you include all of your income, including your salary, money from any side hustles or second jobs, child support or alimony arrangements, business income and any income you receive from investments. If your income varies from month to month, or you are working freelance, one way to get the most out of your budget is to essentially pay yourself a salary. This way you can decide on a set amount you are comfortable with, and save anything leftover on a good month to cushion you through a bad month. This will also help you to curb any unnecessary spending, and help you to feel more financially stable. 

Once you have noted your income, you can start to create a list of outgoings. Once you have this all noted down, you can start to see what is realistic for your budget. Start by tracking your spending for 30 days, or looking at your spending for the previous month. There are a number of ways to track your spending:

Set specific budgeting goals

Personalise your finance goals. Think long-term and set actionable, realistic goals. The key to budgeting is to be specific with your goals and have a solid deadline to work towards. Instead of saying, “I’m saving for a trip overseas,” you should say, “I’m saving $10,000 by June for a trip overseas.” Cementing your goals will give you the motivation you need to make your savings dreams a reality, and give you something more concrete to work towards.

Some popular long-term finance goals are below:

Choose the budgeting format that works best for you

With your income set out in front of you, it’s time to lay the foundations for your budgeting and forecasting set up. It’s important to choose a budget management system that works for you, taking into account what you value. 

Below are two of the most popular simple budget systems you can implement today!

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50 30 20 Budget 

The 50 30 20 budget, made popular by Senator Elizabeth Warren in the United States, is great for allowing flexibility in your budget but can lead to overspending if used incorrectly. To use this budget take your monthly wages after tax and set aside 50% of your monthly income towards needs, such as food, rent and any repayments you need to make. Then take 30% and put that towards your wants, things like entertainment, weekend trips or online shopping. The remaining 20% can then be put towards your savings goals.

Zero-based Budget

A zero-based budget involves making your income minus your outflow hit $0. Using this method, all of your dollars are assigned a job that represents a spending category, with some going to savings and others going to pre-defined pockets. This budget is restrictive, so it’s not a one-size-fits-all solution, but it will definitely help to avoid overspending and meet your goals. 

Using Tools & Tech to keep you on Track

There are a number of organisational tools and tech you can use to keep on top of your budget. Here are some ways to keep yourself accountable: 

Be Aware of these Common Budgeting Mistakes

For people juggling more than one debt, being able to create a budget or set saving goals can be a challenge. Depending on your situation, a debt consolidation loan may help by combining multiple repayments into one while lowering your overall interest rate. 

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