Creating and managing a successful monthly budget is all about knowing how much money you bring in and how you actually spend it. Your income should be greater than your expenses, and you should have enough wriggle room to set money aside each month for savings and retirement.
If your balance isn’t where you want it to be, it’s time to create a budget plan.
How To Create a Budget
To get started on a budget plan, list your income and expenses. Connecting your bank accounts to your favourite budgeting app is the easiest way to do this, but you can also do it manually with a pen and paper or spreadsheet program.
Next, separate your fixed expenses from your variable expenses. Fixed expenses are those that don’t change from month to month, such as housing, utilities, insurance, child care and loan payments, including automobiles, student loans or credit card payments. Variable expenses include groceries, entertainment, dining out, vacations and streaming services. Finally, consider factoring in monthly contributions to savings goals like retirement or an emergency fund.
If your expenses exceed your income, look at your variable expenses first to see where you might trim the budget. After that, you can consider ways to cut back on fixed expenses, such as moving to a cheaper neighbourhood with lower rent or refinancing your debt.
How To Budget for Groceries
Budgeting for groceries can be tricky—everyone needs to eat. If you’re unsure how much to budget for groceries, compare your spending to research from the University of Newcastle, which analysed household grocery spending for singles to families of five. Keep in mind that special dietary restrictions may push your grocery bill higher.
If you want to cut back on your grocery bill, meal planning can help. Create a weekly plan to make recipes that share ingredients or use pantry staples. Meat is a significant expense, so adopting a ‘meatless Monday’ meal can also help lower grocery costs. Buying in bulk rather than single-use packaging can also save you some cash.
How To Budget for a Holiday
A holiday can be an exciting savings goal if you have some breathing room in your budget. The first step to budgeting for a holiday is to decide how much you want to spend and when you want to go. If you’re eyeing a $5,000 beach getaway one year from now, you can break that up into a monthly savings goal of around $420.
Not sure you want to commit to an expensive trip? Consider lower-cost options like a road trip, or keep your eyes peeled for a good deal. Budgeting for a holiday means you’ll have the funds ready when airfares drop or that aspirational ski lodge becomes available for booking.
How To Budget for Rent
To determine how much you should spend on rent, many Australians use the 30% method. This budgeting principle says you should spend no more than 30% of your income on rent or your mortgage (this should include household utility bills, too, if possible). Using this rule, if you make $1000 a week, you would want to spend no more than $300 on your weekly household costs.
Sharing an apartment or house can help reduce your housing budget, as can moving to a cheaper area. If finding more affordable accommodations isn’t an option, you might have to look to other areas of your budget to cut costs.