If you want to get on top of your money this year, you’ve come to the right place.

This article will be showing you exactly how to budget step by step. In addition, you’ll get access to a simple and easy-to-use platform called Billroo. 

Different budgeting methods

There are many different budgeting methods available, however the most popular and easy to follow is the 50/30/20 and Pay Yourself First budgets. 

50 30 20 Budget

The 50 30 20 budget is a rough guide that you can use to do your budgeting. It helps you feel like you’re not missing out in any area of your life. The budget is designed to ensure all your needs are met, leaves room for enjoyment and ensures you are making progress towards your financial goals.

Budget breakdown: 

1. 50% of your budget goes towards your needs, for example your living expenses like your rent or mortgage, groceries, transport, utilities etc. 
2. 30% of your budget goes towards the fun stuff like eating out, going out with friends, travel, entertainment etc 
3. 20% goes towards your savings or investments so that you can feel like you’re getting ahead with your finances every month.

Pay yourself first budget

The pay yourself first budget is when you set aside some money towards your savings or investments before you start allocating your money towards different expense categories. 

Warren Buffet summarises the pay yourself budget perfectly in his famous quote:

“Don’t save what is left after spending but spend what is left after saving”. 

Disclaimer

Don’t be afraid to use both budget methods or create your own. It’s important to find a budgeting method that works for you and aligns with your current financial situation.

How to set up a budget

Create your budget using Billroo, a free and easy-to-use platform and budgeting tool that helps you see where your money is really going. 

1. In Billroo you can create your own budget either individually or with your partner. You can put down your income, investments, expenses and debt.
2. Billroo allows you to easily import all your transactions with open banking. You can also categorise all of these transactions. 
3. Once you’ve put in all of your different income streams and different expenses, you can start breaking down the data and see how your spending is actually going when you compare it to your budget. Is it more or less than what you expected? Is it aligned with your budget? Are there any improvements that you need to make? 
4. You can compare your budget to the previous month. This will help you find areas to improve in your budget. 

Go to Billroo and sign up for free! Give us feedback on this tool, because we will keep iterating on this tool and making it better and better!

Calculate your after tax income

Its so important to know how much your making – especially after taxes.

If you have a salaried job, you have a fixed monthly income. However, if you have a wage job, are a freelancer, contractor, casual employee etc your income will vary. It can be hard and sometimes daunting having a fluctuating income, but don’t let it stop you from being on top of your money!

If you have a fluctuating income, here’s how to budget:

• 🗓️ Look at your monthly income from the past 6 months. Calculate the average you’ve been making. Use this income as your expected monthly income.
• 👩‍💼 Every month, fortnight, week or whenever you receive your income, you should ALWAYS put money aside for taxes and business expenses. The last thing you need is a big fat tax bill from the ATO.

Choose a budgeting plan

Budgeting shouldn’t feel like a restrictive diet. It should naturally be apart of your lifestyle.

As mentioned above there are many different budgeting methods. This includes the 50 30 20 and the pay yourself budget.

Here’s a pros and cons list for each budget.

50 30 20 budget method

Pros

• Straightforward: you don’t need to be a finance wiz to do this method. With this method you’ll know exactly where to allocate your money.
• Savings: setting money aside for savings is prioritised. Using this method, you are guaranteed to always have savings.
• Balanced approached: You have enough money being allocated to all important areas of your life without feeling restricted.

Cons

• Debt: the budget doesn’t take into account debt. Unfortunately, so many people have student loans, credit card debt etc. Its important that your budget reflects this.
• Irregular expenses: The budget doesn’t take into account irregular expenses we might incur. I wish everything was as easy as “a,b,c”, however that’s just not the case. We’ve all had moments when we’ve been hit with an expense that we couldn’t predict.
• Financial goals: The budget is general. If you have a financial goal that you want to hit at a certain timeline, 50 30 20 might not be the best route to go.

Pay yourself first budget method

Pros

• Prioritises savings: You’re forced to set money aside for savings/investing.
• Long-term orientated: If you’re more of a long term planner, you’ll find this method better suited for you.
• Flexible: After you’ve allocated money into savings/investments, you’re free to do what ever. For someone who is a little bit spontaneous, you’ll find yourself enjoying budgeting.

Cons

• Discipline: Because you’ve got so much flexibility in your savings, you need to be extra disciplined. You’ll need to make sure you’ve got enough money to pay for essential items e.g rent, electricity, transportation etc.
• Tight Budgets: If you don’t have a lot of money to play around with, this might not be for you. You could find yourself in situations where you’ve allocated too much money into savings and investments, leaving little room for essential items.
• Less structured: If you’re the type of person that loves structure, this could be a nightmare. You won’t have a blueprint to look at when allocating your money into savings, wants and needs.