How To Manage Your Budget

Struggling to keep your finances under control each month? Setting and sticking to a budget can help – try these tips on the Sunshine Loans blog.

Do you find it difficult to manage a budget? You're not alone. Did you know that 5.9 million Australians live pay to pay? That means there are millions of people out there that struggle to figure out how to manage money better!

If it's time for you to learn how to manage a budget and become financially independent, or perhaps a superstar saver, you've come to the right place.

First things first…

Determine Your Budget

How can you manage your budget if you haven't even started one? Here's a quick-start guide to how to manage budgets effectively.

Set Reasonable Goals

When you're putting together a budget for the first time, start by envisioning your goal. What do you want your bank account to look like in a year's time? If you want to live without money worries, look at budgeting in order to pay off your debt. If you want to own a home, it's time to start planning for a down payment.

Decide what's most important to you, and use that as your starting point.

Identify Your Expenses

This is a big one! Sit down and write down every expensive you can think of. Try not to overlook anything. Here is an example list of expenses:

  • Rental payments
  • Other loan repayments
  • Home insurance
  • Car insurance
  • Groceries, toiletries and other essentials
  • Electricity/gas
  • Phone bills
  • Internet
  • Petrol
  • Public transport
  • Health insurance
  • Medical needs
  • Entertainment
  • Gym membership
  • Streaming services (Netflix, etc.)
  • Dining out
  • Personal purchases (clothes, jewellery).

Divide Your Needs From Your Wants

From the list above (or the list of expenses you have put together), determine what is a need and what is a want. Ditching some of your wants can help you to save money and make your budget a little more flexible. Maybe you could ditch your gym membership and start running around the neighbourhood, for example.

If you can live without one of your wants, and it will contribute to your savings, it may be worth taking it out of your budget. This is an important factor in how to manage your money better.

Align Your Budget To Your Pay Cycle

Make sure your budget reflects your pay cycle. If you receive your paycheque monthly, calculate your expenses per month. If you get paid fortnightly, calculate your expenses per two weeks. Add up all of your expenses, and make sure any leftover funds go into your savings account.

If you're aiming to save money, add "savings" into your budget as though it were an expense. By treating it as something you must pay, you're more likely to put money into your savings

How To Manage Money Better

Now that your budget has been put in place, committing to it is one of the best ways to manage your money. When it comes to how to manage your money better, there are a few other things you can do on top of budgeting.

Give Yourself A Budget For Personal Spending

If you have any money left over after subtracting your expenses from your income, you may be tempted to use this money on entertainment and other personal expenses. But you should still set a limit if you have unbudgeted money to make sure you don't end up disrupting your budget and over-spending.

Track Your Expenses

Small purchases – such as a coffee before work every day – can add up quickly and can negatively affect how you manage your money. For your first month, track random expenses in some way so you can better control them. Ask for receipts and keep these in a journal, or record every purchase in your phone. You'll soon discover unexpected spending patterns that you may need to add into your budget.

Don't Commit To Any New Monthly Payments

Now that you've learned how to manage your monthly budget, try not to add anything extra to that budget. Don't take out any more unnecessary loans or sign up to anything that charges you by the month, such as a new gym membership. If you have an Afterpay or Zip Pay account (or another app that allows you make repayments in instalments), try not to add any more purchases to that account.

Limit Credit Card Spending

If you can, put your credit card away in a safe place so you won't be tempted to use it. It can help to withdraw cash at the beginning of your pay cycle – use that cash instead of your credit card to dissuade you from adding more debt into your life.

Keep On Practising Good Money Habits

Good things take time – even learning how to manage budgets effectively. If you don't quite meet your budget the first time, keep trying. Soon, putting aside regular savings will be a natural thing for you to do.

Need more help managing your budget? Or want to learn how to save money for emergencies? We have plenty more advice on our blog.