Keep a budget, and review it regularly

Building new habits can be hard, particularly when it comes to your finances. Keeping a budget is a great way to work toward your goals, making every dollar count on your journey to financial freedom.

13 Mar 2020

The first step to any (good) budget is understanding your current cash flow—how much is coming in, and how much is going out? It’s important to have a complete picture of your expenses. Track your day-to-day spending consistently, you could do this using a smartphone app or by simply reviewing your bank statements—some banks will even categorise your transactions for you online. How much are you spending on things like utilities, transport, entertainment, etc.? Break your expenses down into essentials and desirables—that is, what you need, including repayment of debts, compared with what you want.

The second step is to cost your goals and prioritise your spending. Are you saving for a holiday, wanting to pay down your debts sooner, or looking to boost your retirement nest egg? How much do you need to achieve your goals, and where will you find the funds? When prioritising, it can be useful to start by looking at those small but consistent expenses, like your morning coffee. At $4.50 a day, five days a week, forty-eight weeks a year, your coffee would cost you over $1,000 per annum. Could you forfeit your caffeine fix or switch to home-brew if it frees up money to invest in your goals? Be realistic with your planning. You might like to use a budgeting tool, such as ASIC’s Budget Planner, available at This calculator invites very detailed input, ensuring you don’t miss anything – like Christmas or birthday gifts – and will calculate any available surplus in your budget.

The third step is to put your plan into action. Follow through with your priorities, and shop around! Do you need more than one streaming subscription at a time? Is there a cheaper phone or internet provider out there? Reach out to your existing service providers as well – they may reduce their fees to keep you as a customer. Can you get a better rate on your gas, water and electricity bills? It may be helpful to use separate bank accounts for your regular fixed costs, discretionary spending, and goals – if you’re saving for something. Having a dedicated account for the basics, with direct debit set up for any bills, will give your budget stability. Consider having an emergency fund as well, giving you some peace of mind should any unexpected costs arise. You might also like to review your Insurance & Cover in super.  If one of your goals is to boost the balance of your super, or you have a surplus in your budget, have a look at Maximising your Super.

Its important to review your budget regularly – at least once a year, or whenever your circumstances change. This will put you on the path to financial security, and financial freedom. You may also benefit from the assistance of a licensed financial advisor.

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