How do you get started?

You can start a budget by simply writing down what you spend over a couple of months. Remember, your budget is your personal tool and you can choose how much detail you want to include. When you are starting out, you may find it helpful to put your spending into categories - such as groceries - rather than keeping tabs on individual items such as shampoo, breakfast cereal and pet food.

Think about what categories you would like to use. Some people find it helpful to work with two groups of expenses:

There are no hard and fast rules for creating a budget. What is important is that it is easy for you to understand. Remember to keep the list of categories simple and useful to you. And be flexible. You can change the categories you use if you find they don't work for you.

Understanding Money budget planner

Image of a calculator Want to start a budget plan? You can use a budget planner to prepare your own budget using the steps set out below. Feel free to experiment. There are no hard and fast rules. Remember it's your budget so you just need to make it easy for you to use.

Putting your budget together

Step 1: Pick a timeframe

Do you need to use your budget as a weekly guide, a fortnightly guide or a monthly guide? Some people like to match their budget to their pay period. This can help you make sure day-to-day expenses and bills are covered. Another option is to do a quarterly or annual budget. This can help if you want to save for large periodic bills or annual targets like holidays.

Once you've decided on a time frame make sure all the numbers you write down match it.

Step 2: Estimate your income

Use the first part of the Budget planner to work out your income. Remember to match the time frame you've chosen for your budget. Stick to regular income like wages and savings interest and use after-tax figures if you can. If your work is irregular and you don't get the same amount each pay, try to estimate an amount close to what you are likely to get on average. Don't include irregular income like a tax refund or an annual Christmas bonus because you may not get it.

Step 3: Estimate your expenses

Enter your expenses in the second part of the Budget planner. The planner includes sample categories and has some blank spaces in case you need to add any other expenses.

Remember to include loan and credit card repayments. And don't forget any savings you want to set aside. Payments into savings should count as expenses in your budget. This will make sure you don't spend the money on anything else.

Match your expenses to the timeframe you chose at Step 1. For example, a quarterly bill of $600 can be included as an expense of $100 in your fortnightly budget. If you do treat quarterly bills like this, you can put the money into a savings account each pay to draw out when the bills are due.

Step 4: Work out the difference

When you've completed the income and expenses tables, you can clearly see how much regular income you receive, and where your money goes. Subtract your total expenses from your total income to get your net result. Do this in the last part of the budget planner.

Step 5: Fine tune and plan

Is the result what you were expecting? Now is the time to revisit your estimates. Have you correctly converted income and expenditure to the time frame you are using?

Does your budget show you spending more than you earn? Is this what really happens to you? Do you find yourself reaching for the credit card regularly? Do you want to change this by cutting back on some of your extras?

Are you OK with week-to-week expenses but find yourself scrambling to pay periodic large bills? Perhaps you could be better prepared if you set aside a small amount each budget period. Do you want to start saving for a bigger goal, such as a house deposit or an overseas holiday? Or do you want to save for the long-term and build up your retirement nest egg? See Saving.

Be realistic. Be careful not to make plans that you can't achieve. If you plan on achieving your goals by cutting out all your extras, chances are you won't succeed. Taking control of your money doesn't mean you have to restrict your budget to the bare necessities.

Step 6: Keep it up-to-date

Keep track of your expenses. Are they close to your estimates? Adjust your budget if you have to. You may occasionally be hit with an unexpected bill - for car repairs, for example. If you blow your budget in one period, see if you can make a temporary adjustment in the next to bring things back on track. If you change jobs or get a pay rise, re-do your income estimates. Once a year or so, it's a good idea to go through your budget and your plans from scratch.

How do you stick to a budget?

If you want to stick to your budget you may need to look at your expenses. If you need to trim your spending, look at cutting down your extras list first. Don't cut them all out. If your budget is too tight, it will be harder to stick to.

make it happen
• Set targets - e.g. save enough money to replace your old tyres.
• Fine tune your budget - e.g. trim the money you spend at the video shop so you can put more away for the tyres.
• Keep track of your spending from pay to pay and adjust it if you're not on track.
• Reward yourself if you do better than you'd expected, - e.g. treat yourself to a movie if you manage to buy the tyres two weeks earlier than you'd planned.

How do you manage unexpected expenses?

Some people worry that an unexpected bill will derail their budget. The best way to prevent this is to plan for it. Try to save enough to give yourself a small buffer you can use in emergencies.

Make it happen
• Ask if you can pay in instalments. Finding a little extra each pay might be easier than paying the bill in one hit.
• There are several government and community services which provide free information and advice about how to plan and manage your finances. Some can also help you control your debts and negotiate with banks, finance companies and debt collectors. See Getting information and advice.

What if you blow your budget?

If you have blown your budget and can't repay your debts, the first thing to do is stay calm. It is important for you to contact the companies you owe money to (your creditors) promptly and tell them you are having financial difficulties and want to discuss payment arrangements. This is particularly important if you've used your home, car or other assets as security for a loan.

It is best to offer something to each creditor, but only what you can reasonably afford to pay. Ask if they will agree to reduce the interest on the debt until you can get back on your feet.

If you have an outstanding credit card debt, try to make the minimum payment each month, otherwise you will have to pay additional fees.

If you are unable to gain control over your budget yourself, a financial counsellor may be able to help you. See Controlling your debts.

More information

There's a lot more that you can find out about preparing a budget.