Budgeting

What is budgeting?

Budgeting is the process of creating a plan for how you'll spend your money. A budget helps you:

track where your money goes
identify areas where you can save
plan for future expenses
achieve your financial goals
avoid overspending.

A budget is not about restricting yourself – it's about making informed decisions about your money and ensuring you have enough for what matters most to you.

Creating your budget

The first step in budgeting is understanding your income and expenses. Here's a simple process:

Calculate your income

Add up all sources of income: salary, wages, investment income, government benefits, etc. Use your after-tax (net) income for accuracy.

Track your expenses

Review your bank statements and receipts for the past 1 to 3 months. Categorise every expense to understand your spending patterns.

Categorise your spending

Group expenses into categories like housing, food, transport, entertainment, etc. This helps identify where your money goes.

Set spending limits

Based on your income and goals, set realistic spending limits for each category. Ensure your total expenses don't exceed your income.

Review and adjust

Regularly review your budget and actual spending. Adjust as needed when your income or expenses change.

Spending categories

Here are common spending categories for individuals. Use these to organise your expenses:

Category	Description	Examples
Housing	Costs related to where you live	Rent, mortgage, rates, repairs
Utilities	Essential household services	Electricity, gas, water, internet, phone
Groceries	Food and household items	Supermarket shopping, food basics
Dining	Eating out and takeaway	Restaurants, cafes, takeaway food
Transport	Getting around	Car expenses, fuel, public transport, parking
Car Expenses	Vehicle-related costs	Registration, insurance, maintenance, repairs
Health & Fitness	Medical and wellness	Doctor visits, pharmacy, gym membership
Insurance	Protection policies	Health insurance, car insurance, home insurance
Entertainment	Leisure activities	Movies, concerts, hobbies, subscriptions
Travel	Holidays and trips	Flights, accommodation, holiday expenses
Education	Learning and development	Courses, books, training, school fees
Clothing	Apparel and accessories	Clothes, shoes, accessories
Gifts	Presents and donations	Birthday gifts, Christmas presents, donations
Home & Maintenance	Household upkeep	Home repairs, garden supplies, cleaning products
Financial Management	Money management costs	Bank fees, financial advisor fees, investment fees
Interest Expense	Cost of borrowing	Credit card interest, personal loan interest
Repayment	Paying down debt	Credit card payments, loan repayments
Other Expenses	Miscellaneous costs	Items that don't fit other categories

Budgeting methods

Here are several approaches to budgeting. Choose one that works for you.

50/30/20 rule

Divide your after-tax income into three categories:

50% for needs (housing, utilities, groceries, minimum debt payments)
30% for wants (entertainment, dining out, hobbies)
20% for savings and debt repayment

Zero-based budgeting

Every dollar of income is assigned a purpose. Income minus expenses equals zero. This method requires detailed planning but gives you complete control.

Envelope method

Allocate cash (or separate bank accounts) for each spending category. When the envelope is empty, you stop spending in that category until next month.

You don't have to stick to one method. Many people combine approaches or create their own system that works for their lifestyle. It doesn't matter which method you choose – consistency is the most important factor.

Tips for successful budgeting

Be realistic: set achievable goals based on your actual spending patterns
Track everything: small expenses add up – include everything in your budget
Review regularly: check your budget weekly or monthly and adjust as needed
Plan for irregular expenses: set aside money for annual bills, car services, holidays
Build an emergency fund: include savings in your budget for unexpected expenses
Use technology: budgeting apps and tools can make tracking easier
Don't give up: budgeting takes practice – stick with it even if you go over budget sometimes.

Common budgeting mistakes

Avoid these pitfalls:

Setting unrealistic spending limits
Forgetting irregular expenses (car registration, insurance)
Not tracking small purchases
Giving up after one bad month
Not adjusting when circumstances change
Ignoring your budget after creating it.

Using Self Managed for budgeting

Self Managed can help you track your spending by categorising your transactions. When you link your bank accounts and categorise transactions, you can:

see where your money goes automatically
track spending by category over time
compare actual spending to your budget
identify spending patterns and trends.

Regular categorisation of your transactions in Self Managed helps you maintain awareness of your spending and makes budgeting easier.

Key takeaways

Budgeting helps you understand and control your spending
Categorise expenses to see where your money goes
Choose a budgeting method that works for you
Review and adjust your budget regularly
Plan for both regular and irregular expenses
Use tools like Self Managed to track your spending automatically.

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