1. Home
  2. Personal Finance
  3. Budgeting 101: How To Budget Money
Published December 22, 2022
Reading Time
6 minutes

Budgeting 101: How To Budget Money

Divide your income among needs, wants, savings and debt repayment, using the 50/30/20 budget method.

Edited By


If I have take-home pay of, say, $2,000 a month, how can I pay for housing, food, insurance, health care, debt repayment and fun without running out of money? That’s a lot to cover with a limited amount, and this is a zero-sum game.

The answer is to make a budget.

What is a budget? A budget is a plan for every dollar you have. It’s not magic, but it represents more financial freedom and a life with much less stress. Here’s how to set up and then manage your budget.

Figure out your after-tax income

If you get a regular paycheck, the amount you receive is probably it, but if you have automatic deductions for a superannuation fund, savings, and insurance, add those back in to give yourself a true picture of your savings and expenses. 

If you have other types of income — perhaps you make money from side gigs — subtract anything that reduces it, such as taxes and business expenses.

In addition, famliarise yourself with your cash flow. 

Here’s how to get started.

  • Check your account statements. This will give you an idea of how much money you have coming in and out of various accounts.
  • Categorise your expenses. Categories could include entertainment, rent, beauty and so on. Knowing where your money goes will help you choose the best budgeting plan for your needs.

Back to top

Choose a budgeting plan

Any budget must cover all of your needs, some of your wants and — this is key — savings for emergencies and the future. 

Budgeting plan examples include 

  • The envelope system, where you use cash and envelopes to plan your spending each month.
  • The zero-based budget, where you allocate all of your money to expenses, savings and debt payments.
  • The 50/30/20 budget, which divides your income into needs, wants and savings.

Back to top

Track your progress

Record your spending and keep your tracking consistent. Monthly is a good start. 

Use online budgeting and savings tools to help keep up with your tracking. Apps like MoneyBrilliant, GoodBudget and Frollo can help.

Back to top

Automate your savings

An easy way to automate your savings is to set up direct debits from your everyday account to your savings account in regular intervals, like after every payday. You might consider opening multiple savings accounts for specific purposes — like saving up for a holiday or big expense — and allocate money accordingly. 

An accountability partner or online support group can help, too, so that you’re held accountable for choices that blow the budget.

Back to top

Practice budget management

Your income, expenses and priorities will change over time, so actively manage your budget by revisiting it regularly, perhaps once a quarter.

As you manage your budget, try to identify room for change by asking yourself:

  • Where are you spending too much money? Can you explore cheaper alternatives for the things you pay for now? 
  • Which expenses can you cut back on? For example, takeaway and food delivery, or using rideshare services.

Back to top

Budgeting and savings priorities

Priority No. 1 is a starter emergency fund.

Many experts recommend you try to build up several months of bare-bones living expenses. We suggest you start with an emergency fund of at least $500 — enough to cover small emergencies and repairs — and build from there.

You can’t get out of debt without a way to avoid more debt every time something unexpected happens. And you’ll sleep better knowing you have a financial cushion.

Back to top

Priority No. 2 is toxic debt.

Next, go after the toxic debt in your life: high-interest credit card debt, personal and payday loans, title loans and rent-to-own payments. All carry interest rates so high that you end up repaying two or three times what you borrowed.

Investigate options for debt relief, which can include bankruptcy or debt management plans, if either of the following situations applies to you:

  • You can’t repay your unsecured debt — credit cards, medical bills, personal loans — within five years, even with drastic spending cuts.
  • Your unpaid unsecured debt, in total, equals half or more of your gross income.

Back to top

Priority No. 3 is, again, saving for retirement.

Once you’ve knocked off any toxic debt, the next task is to get yourself on track for retirement. Aim to save 15% of your gross income, and consider topping up your super fund with personal contributions if you’re in a position to do so.

Back to top

Priority No. 4 is, again, your emergency fund.

Regular contributions can help you build up three to six months’ worth of living expenses. You shouldn’t expect steady progress because emergencies happen, but at least you’ll be able to manage them.

Back to top

Priority No. 5 is debt repayment.

These are payments beyond the minimum required to pay off your remaining debt.

If you’ve already paid off your most toxic debt, what’s left is probably lower-rate, often tax-deductible debt (such as your home loan). You should tackle these only after you’ve gotten your other financial ducks in a row.

Any wiggle room you have here comes from the money available for wants or from saving on your necessities, not your emergency fund and retirement savings.

Back to top

Priority No. 6 is you.

Congratulations! You’re in a great position — a really great position — if you’ve built an emergency fund, paid off toxic debt and are socking away 15% toward a retirement nest egg. You’ve built a habit of saving that gives you immense financial flexibility. Don’t give up now.

If you’ve reached this happy point, consider saving for irregular expenses that aren’t emergencies, such as a house deposit or your next car. Those expenses will come no matter what, and it’s better to save for them than borrow.

Back to top

Frequently asked questions about budgeting

How do you make a budget spreadsheet?

Start by determining your take-home (net) income, then take a pulse on your current spending. Finally, apply the 50/30/20 budget principles: 50% toward needs, 30% toward wants and 20% toward savings and debt repayment.

How do you keep a budget?

The key to keeping a budget is to track your spending on a regular basis so you can get an accurate picture of where your money is going and where you’d like it to go instead.

If you’re in the United States, read this article on the NerdWallet US site.


How to Make Passive Income

How to Make Passive Income

Passive income can offer breathing space when your finances are tight, but whether a cash stream is passive or not isn’t always clear-cut.

What is Income Protection Insurance?

What is Income Protection Insurance?

A financial safety net when you’re too sick or injured to work.

How to Get Your Free Credit Score and Credit Report

How to Get Your Free Credit Score and Credit Report

Australia’s three major credit reporting bureaus must let give you free access to your credit report and score every three months.

16 Ways to Find Fast Cash

16 Ways to Find Fast Cash

Need money now? Learn how to get fast cash, and the types of loans to avoid when you’re strapped for cash.

Back To Top