The new year is a great time to take control of your finances by creating a new budget.

Why you should budget

At a basic level, a budget aims to ensure your expenses don’t exceed your income. A budget can also help you save for big goals - like a home deposit, nice to haves - like a holiday, prepare you for retirement or build a rainy-day fund to cover you in case of a big expense or a period of reduced income.

The 50/30/20 rule

A good rule of thumb for using your income is the 50/30/20 rule where you allocate:

  • 50% of your income for essentials – non-discretionary spending like rent, mortgage payments, groceries, debt repayments and medical and utility bills
  • 30% on extras or nice to haves like entertainment, eating out, and hobbies, and
  • 20% to savings – to work towards goals like home ownership, an emergency fund or a big ticket item like a holiday or home renovation.

Take the first step

Dedicating some time and energy initially to really understanding your cash flow is the first step to taking control of your finances, which in turn will contribute to your financial wellbeing. 

Lucky for you, these days there are a variety of free tools available to help you budget including apps, spreadsheet templates and spending trackers within bank accounts, plus BankVic’s own budget planner.

How to create your budget

  1. Add all your post-tax income from all sources.
  2. Assess your spending: review your transaction lists from all accounts and categorise into Essentials and Extras. Does it fit the 50/30/20 rule? If your spending exceeds your income or leaves no room for savings, you may need to look at areas where you can pull back.
  3. Set an achievable savings goal. Be realistic; you need to make sure you can cover your essentials first.

You may wish to open different accounts to help you stick to your budget – a high interest savings account, and a separate transaction account for essentials and extras.

You should continue to track your spending and review your budget regularly and adjust it for changes in your situation.

We’re here to help

To speak to a banking expert about your goals and how we can help:

Information in this article is general in nature and does not take into account your objectives, financial situation or needs. You should consider the appropriateness of this information and refer to the relevant Terms and Conditions or Product Disclosure Statement before acquiring a product.

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