How to budget & save

Budgeting is an essential tool to help manage your personal cash flow. If you find you are spending more than you earn, then a budget will help you to review your expenses and see in what areas you may be able to reduce expenditure immediately.

Alternatively, if you have surplus funds, which is funds remaining after all expenses have been paid. Use this money to establish a regular savings plan to work towards your personal financial goals.

How to set up a budget

It is best to prepare a budget based on your pay cycles. Using a spreadsheet is the best way to set up a budget, so it can be updated when your circumstances change. If you are not sure what you spend, start by looking at bank balances and old credit card statements; you will be surprised by what you see. Alternatively, personal budgeting software such as You need a budget can also be very helpful.

We have detailed steps to guide you through setting up a budget and achieving your savings goals:

Step 1. Record your income

Recording your income will show where your money is coming in and when. If you do not have a regular amount of income, work out an average amount. Make a list of all the money coming in and how often.

Step 2. Add up all your expenses

For each of the expenses, you need to include what it is for, how much and when. Regular expense are your needs, the essential items that you need to pay for to live.

Fixed expenses

• rent or mortgage payments
• electricity, gas, and phone bills
• council rates
• household expenses, like food and groceries
• medical costs and insurance
• transport costs, like car registration and public transport
• family costs, like baby products, childcare, school fees and sporting activities

Debt expenses, for example:

• personal loan repayments
• credit card payments
• mortgage repayments

Unexpected expenses, for example:

• car repairs and services
• medical bills
• extra school costs
• pet costs

Not all expenses are in sync with your pay period, for example utility bills occur every three months. These expenses will need to be distributed across multiple pay periods, so that the money to pay them is set aside before the bills fall due. Therefore, it is important to create a pay period budget that incorporates 12-month budget of your income and expenses across the year.

Try our budget calculator to see where all your money is going and we recommend getting in touch with expert financial advisers to take it one-step further. Contact us or book a free consultation

Step 3. Add up totals & calculate budget surplus or deficit

After completing the list of expenses, add up all your income and expenses. If your income is higher than expenses then congratulations, you have a budget surplus. This is great news and you are off to a great start. There may be areas where you can free up even more money.

If your expenses are higher than your income, then that means your budget is in deficit.  However, there is some good news, you now have the tools to analyse your spending and decide where changes need to be made. Review your budget to identify categories that are eating into your income. Look at areas where you can reduce you spending, on such items that you are overspending on, shop around and see where you can save on your utility bills.

Sometimes a budget will not balance no matter how you look at it. At Oracle Advisory Group, there is always a solution. With our experience helping our clients, we can help you work through your budget. We can make it easy for you, by exploring your income and expenses and see where savings can be made.

Step 4. Set SMART goals

It is vital to set SMART goals before you start a budget.

Specific - define what you want to achieve, otherwise it is difficult to know how you are going to achieve it.

Measurable - have an accurate understanding of your progress/results. Ideally the goal is numerical and trackable

Attainable - to encourage perseverance, enthusiasm and avoid guaranteed disappointment

Relevant - ensure your goals contribute towards your bigger picture objective

Time-frame - without a timeline you will not be able to determine if you are on track for the ultimate objective.

Once you have decided on your goals, then you can start to make informed choices about how to work towards achieving them.

Step 5. Make a Plan

Set up a clear plan to help you manage your spending, a budget plan will help you by mapping out a plan to your financial goals. Your budget surplus will show you how much you can afford to set aside. Create a category in your budget spreadsheet for savings goals.

Step 6. Adjust & Review

It is vital that you keep reviewing your budget on a regular basis because your finances are forever changing, and new expenses will come up and fluctuate your budget. Make time to review and adjust your budget weekly.

Save now & Spend later

Saving is much easier if you commit to putting the money aside at the start of your pay period and spending what is left, rather than trying to limit your spending and saving the amount left over.

An automatic deduction, either directly from your pay, or from your bank account a day or two after you get paid, is one of the easiest ways to set yourself up so that you save first. That way, you know exactly how much you have left to spend each pay period.

We generally think saving 10% of your take home income is a good place to start. If you transfer it to another bank it is much less tempting to access thoughout the month.

Tips to keep on track

• Use cash instead of cards
  Withdrawing cash for living expense (groceries, petrol etc.) from the bank once a week. Using cash is a good reminder of your budget whereas debit and credit cards make it easier to overspend.

• Plan your meals in advance
  By planning your meals in advance and sticking to a shopping list, it will go a long way to achieving your financial goals and budget. Also, the less contact with shopping centers, the less you are likely to spend.

• Open a separate saving bank account
  Setting up an auto-transfer to your savings account from your everyday account, will ensure you do not spend the savings you are working towards. It is key to ensuring that the money never touches your pocket.

• Grow your savings safety net
  Your goal should always have at least three months’ worth of cash reserves set aside for ‘rainy day’ or unexpected bills.

• Focus on the positives
  Achieving financial success is not achieved by looking at your bank statement once a month, but it is keeping on top of your daily money habits. It is taking lunch to work instead of buying lunch or skipping a bought coffee every day to only 1-2 times week and you will see the savings adding up.

• Share the responsibility
  Make sure to share the responsibility of the budget with everyone in the household. If you are the only one looking to save, while your partner is spending you into debt, its best to both get on the same page of your financial goals. Sit down together and plan how much spending money you should each have.

The most vital thing when it comes to a budget, is to be honest with yourself about your spending habits. Once you have a solid budget, the job is only half done.
Now its time to keep it going.

Still need help with your budget?
Talk our expert financial advisers, to help you manage your budget and achieve your savings goals. Contact us or book a free consultation today!

Important information

Advisory Group makes no representation or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. The information in this document is general information only and is not based on the objectives, financial situation or needs of any particular investor. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek their own professional advice. Past performance is not a reliable indicator of future performance. The information provided in the document is current as the time of publication.