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How to start a budget to reduce your debt

Want to take control of your finances but not sure where to start?

Time to create a budget!

Why do I harp on about budgets? Because it allows you to make financial decisions ahead of time, which makes it easier to cover all your expenses throughout the year. By budgeting consistently it can help you turn your finances around and begin to build wealth! - A good reason as any to fall in love with your budget.

Why is budgeting important?

With a budget you can track your spending and determine if it is matching your priorities. Often when people start budgeting they are surprised to see how much money is going to things that are not important to them, like eating at fast food restaurants or paying for conveniences (those $5 and $10 costs add up!). Budgeting allows you to monitor your progress on goals and make sure you are sticking to your financial plan.

How to set up your budget?

Setting up a budget is a straightforward process it is finding the time to sit down and do it is the hard part.

It helps to have a list of the bills that you must pay each month as well as your expected income. If you have not budgeted before, you can start by looking at your past three month’s expenses.

Using your bank statements break your spending into categories - Note this is where budgeting software comes in handy, you can upload your statements and use the software to start to sort them I can show you how.

  1. List your income for the month. This should include any pay you receive, as well as income from other sources like child support or investments. If you have a business, you should include the amount that you pay yourself out of the business each month.

  2. List your expenses. Start with the most important to the least important. If you want help with prioritising your expenses get in touch to receive your Savvy Saving Mum Starter Kit Listing the expenses in order makes it easier to make cuts in your budget if needed. The most important should be things that cover your necessities. You will need to cover your housing, food, utilities, transportation costs, debt payments, and savings goals first. Then you will list luxury items which can include clothing, entertainment, Foxtel, Netflix, eating out and gym memberships.

  3. Once you have a list of your expenses and your income, you will need to compare the two numbers. Your expenses should be less than or equal to your income. If you have additional money after you plan your budget, you can add it to the categories for your financial goals like getting out of debt or building an emergency fund. If you have more expenses than income, you will need to find ways to cut back on your expenses. Start by cutting money from your categories in the luxury section of your budget. You can also work on ways to increase the amount you earn.

  4. You will need to track your spending If you end up spending more in one category than you had planned, you can transfer money into that category to cover it from another category. For example, you budgeted $200 for food for each week and you ended up spending $250, then you can move money from your entertainment category to cover it. In order to do this you will need to check on your spending every day to see how much you have left.


    After you have completed your first month of budgeting, it will be easier to plan for the next month. At the end of each month look at your spending and make adjustments for categories in which you spent more than you planned and cut back on the categories that had additional funds in them. Would you like to make this process easier? Have a chat to me today I can help you get set up with minimal stress and get you on your way to achieving your financial goals!


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Terri Watson is a mother of three, after experiencing there own financial struggles in 2016 she was determined to find ways to help other families in similar situations. Learn more about her here.

Terri Watson