How to set a budget you’ll stick to
Budgeting is an essential part of managing your money to help you reach your goals. There's no one size fits all approach – so it’s important to set an achievable budget that you're more likely to stick to.
We’ve got the basics of how to set up a budget, track your spending, and a few other tips and tricks that will help you get on your way.
Get the basics of budgeting down
Budgeting in its simplest form is about two numbers:
1. The amount you earn each week or month
If your income fluctuates weekly or monthly that’s okay, just look back at the last 3 to 6 months of money you earned and work out what the average is (tip: add 3 month's income up and divide it by 3 to get your average).
2. The amount you spend each week or month
Add up your regular expenses, including:
- fixed expenses like mortgage repayments or rent
- regular expenses like utility bills for gas, electricity, and internet
- variable expenses like groceries and transport costs
- savings buffer for unexpected expenses like medical bills or car repairs.
Once you have these two numbers sorted, the amount that’s leftover is what you can potentially save.
What do you do when your expenses run on different cycles?
Not every expense is going to follow the same payment frequency. Your car registration might be an annual payment, but your phone bill is monthly, and maybe you re-fuel your car about once a fortnight. Adding all the separate amounts and timings can be confusing – but if you align it to your pay cycle, you’ll have a much easier time.
For example, if you get paid weekly, divide that rego bill by 52, the phone bill by four, and then halve the average amount it costs to fill up your car.
Getting stuck? Try using our Budget planner, which can do all the adding up for you.
Decide how much you can save
Now you’ve gone through all of your regular outgoings, you might be seeing some patterns that you’re not too thrilled about. Here is where you can find ways to trim the fat and make changes to your day-to-day spending.
Depending on a) how big your goals are, and b) how soon you want to achieve them, you’ll need to decide how much you can save. It might be time to talk trade-offs. For example, if you’re saving for a house deposit, you might decide not to go out every weekend, or trade restaurant meals for faux-takeaway nights.
If an overseas trip is on the cards, skipping that weekend getaway could buy you a few nights' accommodation somewhere exotic. Or, it could be as simple as making a promise to catch the train a bit earlier instead of ordering that last-minute Uber.
Remember you need to keep some joy in there too. So that Pilates class that makes you feel a million bucks might need to stay in the budget... because, #selfcare.
Stash those savings in a high interest savings account
Once you know how much you need to survive, the amount leftover is what you can save each week or month.
If you don’t have one already, get yourself a high interest savings account and watch that compound interest grow. If you’re worried about temptation getting in the way of your goals, set up regular direct debits that line up with your pay day, so the money is put away before you can even touch it.
Still not sure how you’ll stick to it? We’ve got a few alternative methods you can try.
Make it visual
Make a visual budget tracker to keep you focused on your goals. This can be an elaborate poster in your room, or a wallpaper on your phone – something that will remind you what you’re working towards when temptation kicks in.
The myBOQ app also has in-app features like the Budget tracker, that helps you track your spending to keep you on course.
Try bucket budgeting
A bucket budget helps you separate your living expenses from your discretionary spending (AKA splurges). It also allows you to set money aside for emergencies and unexpected costs. All it takes is two steps:
1. Set up an account for each of your buckets
You might like to set up an everyday bank account for each of your spending buckets, and a high interest savings account for your savings goal. Common buckets might include:
- bills and household expenses
- splurge spending
- emergency funds
- savings.
2. Set up automatic transfers
Set transfers around your pay cycle to divide your income instantly or set yourself a calendar reminder to transfer the cash each time you’re paid.
Consider the ‘pay yourself first’ method
This method prioritises putting money into savings first, rather than only saving what’s left. By doing this, the amount you have left to spend is limited, and you won’t be tempted to splurge and blow your budget.
This way could feel restrictive, but as long as you’ve allowed yourself room for joy each week or month, it can be a great way to practice some healthy saving habits and put an end to mindless spending.
Don’t forget to track your spending
Once you’re up and running with your new approach to budgeting, don’t forget to track your spending. Look at your transactions and make sure you’re sticking to your budget. And if you’re not, do you need to try harder to stick to your budget, or does your budget need to change?
At the end of the day, your budget is your money, so you get to choose.
Get started with the myBOQ app
Now that you have the basics down, think about how you can make your money work even harder. If you have a BOQ account, the myBOQ app comes packed with features that could help you with your goals, like in-app budgeting, round ups and lots more.
