During Term 2 we will be looking at Budgeting. Budgeting is like balancing. In preparing a budget you are trying to balance money coming in and money going out. A budget is a plan which estimates future income and spending. It allows you to have more control over your life by helping you to think ahead and spend wisely, according to your income and to avoid getting into debt.
How to Budget
1. Collect your information. Details of the amounts and timing of income and payments can be estimated from past experiences by checking documents like pay slips and bank statements.
2. Identify your expected income and when you are likely to receive it. You might have a job where you are paid weekly, fortnightly or monthly, you might receive an allowance from your parents or you might have interest or dividends from an investment.
3. List all your fixed expenses (or priority expenses). These are the payments that you can’t avoid making or are the most important. You also need to know when these payments need to be made. They could include car insurance, credit card payments and rent.
4. Do the same for all your other expanses. These are called discretionary expenses and can be varied or avoided if necessary. They include things like entertainment, magazine subscriptions and clothing.
5. Draw up a worksheet or grid. Use Excel to do this. You can prepare your budget on a weekly, monthly or annual basis, depending on your needs. A Simple Budget Template can be downloaded here.
6. Determine your budget surplus or deficit. A surplus is when you have more income than expenses. A deficit is when you have more expenses than income. If you have a surplus, you can save this money for a special purpose such as a holiday or a new car. If you have a deficit, you might need to look at trimming back your budget, increasing your income or in the worst case, borrowing money.
For more information about budgeting you can download the budgeting lessons from Consumer Affairs Victoria.