Managing money and budgeting

Money management: why it’s important

Basic money management is about meeting your family’s everyday expenses, handling unexpected bills and saving for the future.

Money management can put you in control of your money, which helps you reduce stress and feel more secure. It lets you enjoy family life, rather than worrying about your finances.

Communication in your family plays an important role in managing money well. Honest conversations with your partner, if you have one, can help to reduce conflict about money. And involving children in planning and budgeting can make it easier to achieve savings goals together.

A family budget: why it’s a good idea

A family budget is essential to managing your money.

That’s because a family budget helps you:

spend your money wisely on the things you must have – these are your needs
save money for the things you like but can live without – these are your wants
save money for your family’s future – for example, preparing for another child, buying a house or investing
set aside money for unforeseen expenses – for example, if your car breaks down and needs repairs
stop accidental overspending.

Working out how much money you need for everyday essentials like food, housing, utilities like gas, electricity, phone and water, transport and medical services can help you work out how much money you can set aside to cover unexpected expenses, save for the future and buy things you want.

Budgeting can help you and your family take the first step towards control of your money. It can also help you avoid debt.

Getting started with budgeting

The key to budgeting is sticking to a basic rule – spend less than you earn.

One way to start budgeting is to list the:

money you have coming in
things you spend money on
things you owe money on.

It can help to look at past salary statements, benefit statements, bills, bank statements and credit card statements.

Try to look at enough bills and statements from the past year to understand your usual earning and spending habits. It’s good to look at how some bills are higher at different times of the year. For example, energy bills are often higher during winter because of heating.

Be sure to include all the ways that money is coming in and going out.

After you’ve accounted for essentials and emergencies, your aim is to have money left over to save and spend on things you want.

People often underestimate how much they spend. Budget planners and savings calculators can help you get on top of your family budget and keep track of your spending. You can find many simple, free budget planners online.

Working out what you spend: the first step towards managing money

One of the hardest things about making a budget and managing money can be keeping track of what you spend.

Spending items can include regular expenses and irregular or once-off expenses.

Here are some regular expenses you might want to include in your family’s budget:

mortgage repayments or rent
utilities – gas, electricity, water, phone and internet
council fees and land taxes
school or tertiary study fees
health, car and household insurance
transport costs – for example, public transport, petrol and tolls
food and grocery items
credit card and personal loan repayments.

Here are some irregular or once-off expenses you might want to include in your family’s budget:

dining out and takeaway food
home maintenance and household goods
school uniforms, textbooks and stationery
medical and dental fees
car repairs
personal items like clothing and haircuts
registration fees and equipment – for example, for sports, music or dance programs
holidays
entertainment
gifts – for example, for birthdays, weddings and other celebrations
other things like special treats for you and your family.

If your income allows, deliberately overestimating the money you need for bills might help you find extra spending money.

If you’re not confident about managing your money or you need help getting your finances under control, you can use the Australian Government Financial Information Service. This service is free and available to everybody. Or you could look into choosing a private financial adviser.

Planning how and what to save: a key part of managing money

Your budget will tell you whether you’re currently spending more or less than you earn. If you’re currently spending more, it can help to have a family meeting to discuss how you can save money. And if you’re already spending less than you earn, you can look at how to save and how to use your savings.

Here are tips for making a savings plan:

Review your spending. Figure out whether you’re saving as much as you can. Could you spend less on certain items? Do you have any high-interest credit cards or other loans? Could you pay these off as soon as possible and look into more suitable credit or loan options? It’s a good idea to do this regularly.
Build a savings buffer. Before you start saving for your wants, it’s important to keep extra savings for financial emergencies. For example, you could aim to keep some money in a separate savings account for emergencies. It’s a good idea to keep about 3 months’ worth of expenses.
Decide what you’re saving for. What are your goals? What do you want to save for in the next 2 years, 5 years and beyond? How much do you need to save to achieve them?
Set a deadline for your goal. Give yourself plenty of time – saving can seem to take forever. But be realistic, and you’ll avoid feeling pressure.
Open a fee-free bank account, which is separate from your main account. You can use this account only for saving towards your goal. You can set up a direct debit from your main account to regularly transfer a set savings amount.
Look into other options, like asking your employer to split your salary payment, so some of it goes into your separate savings account.
Speak to your bank, financial institution or financial adviser if you want more advice.

Once you’ve come up with a savings plan, it’s a good idea to review the pros and cons before you start. This way you’ll know how it might affect your family life. If there are parts of your plan you’re unsure about, seek advice or double-check your calculations before you go ahead.

If you’re already spending less than you earn, you might consider adding to your superannuation or investing some of your savings into high-interest bank accounts or term deposits, shares or property. Talk with a financial adviser about what investments suit your family best.