Grown ups

Managing money and budgeting

Managing money and budgeting

A family budget: why it's a good idea

A family budget is a record of what you earn and spend.

A family budget will help you:

  • spend your money wisely on the things you must have - these are your needs
  • save money for the things you like but can live without - these are your wants
  • set aside money for unforeseen expenses - for example, if your car breaks down and needs repairs
  • stop accidental overspending.

Working out how much money you need for everyday essentials like food, housing, utilities like gas, electricity, phone and water, transport and medical services can help you make sure you have enough for unexpected expenses and emergencies.

Budgeting can help you and your family take the first step towards control of your money. It can also help you avoid debt. And it lets you get on with being a family, rather than spending too much time worrying about your finances.

Getting started with budgeting

The key to budgeting is sticking to a basic rule - spend less than you earn.

One way to start budgeting is to list what you earn, spend money on and owe. It can help to look at past salary statements, benefit statements, bills, bank statements and credit card statements. If you spend or earn money any other way, be sure to look at this too.

Bills and statements from the past year should be long enough to show your usual earning and spending habits. It's good to look at how some bills are higher at different times of the year. For example, electricity and gas bills are often higher during summer and winter because of heating and cooling.

After you've accounted for essentials and emergencies, your aim is to have money left over to spend on things you want.

If you can, it's also good to put a set amount towards savings each week or month. This way you'll have money for unexpected expenses, emergencies and long-term goals, like house repairs or renovations, family illnesses or family holidays.

Each week or month, try to budget a specific amount for expenses, fun, leisure and savings - and then stick to it. This is usually the hard part!

Budget planners and savings calculators can help you get on top of your family budget. You can find many simple, free budget planners online.

Money management: working out what you spend

One of the hardest things about making a budget and managing money can be keeping track of what you spend.

Spending can be regular (fixed expenses) or irregular or once-off (variable expenses).

Here are some of the fixed expenses you might want to include in your family's budget:

  • house repayments or rent
  • utilities - gas, electricity, water, phone and internet
  • council fees and land taxes
  • school or tertiary study fees
  • health, car and household insurance
  • credit card and personal loan repayments.

Here are some of the variable expenses you might want to include in your family's budget:

  • food
  • home maintenance and household goods
  • school uniforms, textbooks and stationery
  • medical and dental fees
  • car repairs and petrol
  • public transport
  • personal items like clothing and haircuts
  • holidays
  • entertainment
  • other things like gifts and special treats for you and your family.

If your income allows, deliberately overestimating the money you need for bills might help you find extra spending money.

Money management: working out what you want to save

Your budget will tell you whether you're currently spending more or less than you earn. If you're currently spending more, a simple savings plan can help you spend less. And if you're already spending less than you earn, a savings plan will help you put some of your leftover money aside for unexpected expenses, emergencies and long-term goals.

You can sit down together as a family and look at how you can save. For example, can you spend less on certain items? Do you have any high-interest credit cards or other loans? Could you pay these off as soon as possible and look into more suitable credit or loan options?

Here are some tips:

  • Build a savings buffer. Before you start saving for your wants, you could keep extra savings for financial emergencies. For example, you could aim to keep some money in a separate savings account. You can use this money for unexpected or emergency expenses, which can help you avoid going into debt.
  • Decide what you're saving for. What are your goals? Give yourself plenty of time - saving can seem to take forever.
  • Set a deadline for your goal. But be realistic, and you'll avoid feeling pressure.
  • Open a fee-free bank account, which is separate from your main account. You can use this account only for saving towards your goal. You can set up a direct debit from your main account to regularly transfer a set savings amount.
  • Look into other options, like asking your employer to split your salary payment, so some of it goes into your separate savings account.
  • Speak to your bank, financial institution or financial adviser if you want more advice.

Once you've come up with a savings plan, it's a good idea to review the pros and cons before you start. This way you'll know how it'll affect your family life. If there are parts of your plan you're unsure about, seek advice or double-check your calculations before you go ahead.

If you're not confident about managing your money or you need help getting your finances under control, you can use the Australian Government Financial Information Service. This service is free and available to everybody. Or you could look into choosing a private financial adviser.