Home  » Browse  » Learn to budget and save money

Make sure that when you put values against your sources of income you are using the after-tax (or take-home) figures. These can be very difficult to calculate. Your past taxation summaries can help you work them out. If not, assume that any additional income above your main salary is taxed at the highest rate, then you'll be pleasantly surprised if it turns out to be less!

Convert each of your sources of income to a yearly amount by multiplying weekly payments by 52, fortnightly payments by 26, monthly payments by 12, and quarterly payments by four. Then, total the yearly payments and divide by 52 to get a total average weekly income. Work in whole dollar amounts. An example is shown in Table 1 below:

Table 1

This weekly amount is all you are able to spend each week (on average). Your total expenses should be less than this amount so that some of your money can be saved into an investment account for the future.

Next, draw up a list of the essential outgoings you have little control over and make a table similar to the one above. These include:

»	Rent or mortgage repayments
»	Insurance - health fund
»	Insurance - home and contents
»	Insurance - car
»	Insurance - life/personal/income
»	Car registration
»	School fees and related costs

An example is shown in Table 2 below:

Table 2

This weekly amount should be much less than your weekly income, and should be put away each week to cover these expenses. The amount you now have left to spend is your income minus the essential expenses which in this example is $837 - $285 = $552.

Now make a list of all the other important outgoings that you have more control over (by changing the way you do things). These include:

»	Transport fares
»	Petrol
»	Parking fees and tolls
»	Supermarket - groceries, meats, toiletries, cleaning products
»	Internet access
»	Telephones - house, mobile
»	Utilities - electricity, gas, water
»	Repairs
»	Savings*

* Savings are considered an expense so that you can budget for it.

An example is shown in Table 3 below:

Table 3

This weekly amount should also be budgeted for and put away each week so that you can cover those expenses. At this point, have a look at how you can cut down on some of those expenses. Do you really need two telephone lines? Do you turn the lights and television off when no one’s in the room? Can you catch a lift to work or ride your bike in?

Now subtract these expenses from the amount previously left over. In this example the amount left over for non-essentials will be $552 - $418 = $134.

Lastly, make a list of items that are nice to have but which you can cut back on so that you come in on budget. These include:

»	Cigarettes
»	Alcohol
»	Entertainment
»	Dining out
»	Newspapers, books, magazines
»	Holidays
»	Household appliances
»	Games and toys
»	Computer consumables (discs, paper, ink, toner)
»	Haircuts

An example is shown in Table 4 below:

Table 4

Subtract these expenses from the amount that you have left for non essentials. In this example it comes out to $134 - $216 = -$82. 

If this amount is positive, then you have money left over which you can save (recommended) or spend elsewhere. If this result is a negative number (as in the example) then you are over budget! If you are over budget then you are probably borrowing from friends and relatives and "maxing out" all your credit cards. This is dangerous because you will forever be going backwards into increasing debt. You’ll need to look at where you can make savings in Table 4 and to a lesser extent Table 3. Make some hard decisions initially so that you quickly get back on top of things.

It is important to remember that budgeting as outlined in this article works out on average over the whole year, but there will be times throughout the year when several bills seem to come together. For example, what happens if you have $900 of expenses but you don't have enough liquid cash to cover the payments? This is why it is important to start saving money from a very early age (when you get your first job as a teenager!) so that you have a "buffer zone" of cash to draw from when needed.

Happy saving!

Disclaimer