How you can save more by setting up a simple budget that works


Do you know how much money you spend every week? How much goes towards the essentials and how much is left over for everything else? If you don’t know the answer, now is the time to find out – and put it down on paper. Understanding where your money is going can help you reach long-term savings goals faster, as well as letting you spend guilt-free on the things that make you happy.

Some call it a ‘budget’. I don’t, because it conjures up negative thoughts—not dissimilar to the word ‘diet’! Things you can’t do, can’t have, unrealistic and unmanageable restrictions.

Instead, let’s use the term ‘spending and investment plan’. The reality is we all need to spend money. We need to pay the rent (or mortgage), buy groceries, petrol and even save for a holiday once in a while. Instead of imposing strict rules and denying yourself an enjoyable life, you need to balance your income against your expenses in a way that still leaves money left over to invest in your long-term future.

Bills, bills, bills

First, add up all your fixed expenses. These may include rent or mortgage payments, utility bills, rates, insurances, car registration, school fees, memberships and groceries (yes, this will fluctuate but it should be roughly the same month to month).

Include everything you pay for—whether monthly, quarterly or annually. Work out what you spend on these for a whole year. Now divide by how often you get paid (if it’s monthly, divide by 12; weekly, divide by 52; fortnightly, divide by 26). That’s what you need to set aside just for bills.

The Australian Government’s MoneySmart website has some great tools to help you calculate your expenses.

Set up your money pots

Once you have a clear picture of your income and fixed expenses, it’s time to create what I call ‘pots’ of money – one for bills and one for your very own ‘pocket money’. Your pocket money is for discretionary spending and fun. Think takeaway dinner, coffee or a meal out, hairdresser, nails, movies, alcohol…shoes! You may even decide to pay yourself pocket money in cash. This way, you’ll be more inclined to make appropriate spending choices as you see the money disappear.

Other pots should include one for your credit card if not covered by bills or pocket money, as well as a holiday fund and savings.

By setting up your money pots, you’re channelling your money towards your goals and make strategic decisions about where to invest it.

Ready, set, automate!

Take it to the next level by setting your online banking to make automatic transfers where possible so that predetermined expenses are paid by direct debit or a recurring transfer.

If your bank offers additional savings accounts at no cost, think about opening separate accounts for each of your ‘pots’. You can then set automatic transfers out of your pay each week, putting the desired amount in each pot without lifting a finger.

Holidays are a need, not a want

Holidays are not a luxury. I repeat: holidays are not a luxury. Your holiday pot is essential to your spending plan. You work hard and you deserve downtime. Plus, research shows it’s good for your health—improving your quality of sleep, decreasing blood pressure and improving mood.

Be realistic about what a holiday looks like or how often you take a break because the vacation needs to be within your means.

Review your plan regularly

American writer Allen Saunders famously said: “Life is what happens to us when we’re making other plans.” Life is bound to throw a few curveballs your way so don’t be afraid to adjust your spending and investment plan as needed. Perhaps you get a promotion, get made redundant, buy a house or have a baby so don’t forget the emergency fund too. All of these scenarios will affect your finances – so your plan must be flexible.

There’s no denying we all need to spend money. But by taking control of how you spend your hard-earned cash, you’ll be surprised how far it goes. Your spending and investment plan will help you save faster, spend more wisely and enjoy life more.

About Helen Baker'

Helen Baker is a licenced Australian financial adviser and author of two books: One Your Own Two Feet – Steady Steps to Women’s Financial Independence and On Your Own Two Feet Divorce – Your Survive and Thrive Financial Guide. Helen is among the 1% of financial planners who holds a master’s degree in the field. Find out more at | Note this is general advice only and you should seek advice specific to your circumstances.

    Recommended for you

    What Do You Think?

    Your email address will not be published. Required fields are marked *