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Budgeting 101: Money management and achieving financial goals

Want to save money, pay down debt, achieve your financial goals faster and live well along the way? Budgeting is the answer! These budgeting 101 tips for beginners will show you how to make a budget that works and reveal the secrets to keeping your budget and financial goals – on track.

The benefits of budgeting

Budgeting is boring, right? True, budgeting itself might not make for riveting conversation, but the goals it can help you achieve most certainly do. Holidays, a house deposit, having a baby, launching a business, retiring in comfort, shopping without guilt, and so on, are all the benefits that can come from budgeting.

Budgeting is a powerful money management tool that can help you:

  • Achieve your financial goals
  • Analyse and take control of your spending
  • Find extra money for saving, paying down debt or investing
  • Escape the insecurity of week-to-week living
  • Stop relying on your credit card and loans to make ends meet
  • Make stronger financial decisions
  • Future-proof your finances and prepare you for ‘what-ifs’
  • Save time managing your money
  • Relieve financial stress and worry
  • Stop fighting with your partner or loved ones about money

What is a budget?

Imagine you were heading off on a long trip across the country. You wouldn’t just start driving. You would first look at a map to plan your route. You’d look for rest stops, petrol stations, sights to see along the way. The alternative, without a map or GPS to guide you, is that you could take the long way, go in the wrong direction or go nowhere at all.

The same can be said about your financial goals: the best chance you have of achieving them is to have a plan. Yet the majority of people have no financial map at all. Money comes in and money goes out, which can lead to a lot of driving in circles!

In contrast, a good budget is like a map for your money. It will show you the fastest, most efficient path to reach your goals. If something unexpected happens along the way (eg. your cat needs emergency surgery), your budget can even help to recalculate the route.

Of course, if you’re new to budgeting you might be wondering if this money mapping is going to be time consuming or difficult. We won’t lie—creating a workable budget does take a little time. But we promise the results are worth it. We also promise that budgeting reduces financial stress and uncertainty, which gives you more financial freedom in your life, not less.

Budgeting 101 tip #1: Start with why

Why do you want to make a budget? Are you saving for something special? Trying to pay down debt faster? Perhaps you’re tired of living week to week or sick of running out of cash before payday. There are a million good reasons to manage your money better with a budget.

Immediate, short and long term financial goals
Start with your immediate goals, then short term and long term. MyBudget families save $3,500 for holidays each year on average. What will you budget for?

Your financial goals don’t have to be big or over-the-horizon to be worthwhile. In fact, it’s good motivation to have some short-term goals (such as saving for a concert ticket or date night) to look forward to on your way to achieving your long-term goals (such as saving for a house or retirement).

FURTHER READING: 5 ways to visualise your financial goals and achieve them faster >>

Budgeting 101 tip #2: Don’t overestimate your income

Your income is any money you receive or get paid throughout the year. As well as salary and wage payments, you may also have income from other sources, such as child support, a pension or dividends. If you have joint finances, make sure you include you and your partner’s income.

What if your income is inconsistent? Casual and contract work, commission-based sales, self-employment and other types of work can result in pay cheques that go up and down. This makes budgeting more challenging because there isn’t a set amount of money coming into your budget every pay cycle. If this describes your situation, the safest approach is to base your income on your lowest paycheque or monthly average.


Use your net income for budgeting. Net income is your take-home pay after taxes and other payroll deductions.

Budgeting 101 tip #3: Don’t underestimate your expenses

A common budgeting mistake is to include only essential, fixed expenses in your budget (eg. rent/mortgage, groceries, transport, utilities, insurance etc). However, for your budget to be realistic, it needs to include all of your discretionary expenses too.

Essential expenses describe items you need to live. Think needs: housing, food, transport, medical and electricity bills.


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Everything else you spend money on are discretionary expenses. Think wants: restaurant meals, coffee, fashion, tech gadgets, memberships, subscriptions, home renovations, trumpet lessons, and so on.

Here are some discretionary expenses that tend to be forgotten:

  • Birthdays, Christmas and special occasions
  • Entertainment (eg. restaurant meals, going out, Ubers)
  • Vet, grooming and pet supplies
  • Haircuts and beauty treatments
  • Electronics, music, magazines, hobbies, gadgets
  • Subscriptions
  • Clothes and fashion
  • Alcohol and cigarettes

It’s all these little discretionary expenses that can add up quickly. The best way to uncover them is to go through your debit and credit statements for the last three to six months. Use two different coloured highlighter pens to code your expenses as essential (needs) or discretionary (nice to have but not necessary).


Amanda and paul were frustrated they hadn’t been able to afford a holiday in years. when they created a budget it revealed how much money they were leaking on little things. by cutting back on takeaway meals, cancelling some subscriptions and getting better organised with their grocery shopping, they were able to save nearly $300 a month.

Budgeting 101 tip #4: Take the whole year into account

A common budgeting mistake is for people to base their budget on their pay cycle or the calendar month. Budgeting your monthly expenses and income is a good start, but the challenge comes when an annual or quarterly bill pops up. Suddenly, there is not enough monthly income to cover the budget’s usual monthly expenses plus, for example, annual car registration.

By creating a 12-month budget, your entire year of finances is mapped out. For a lot of people, this is where they discover why their finances feel like ‘one step forward and two steps back.’ On a weekly basis, it looks like they live within their means. But it’s the annual accumulative effects of kids’ birthdays, Christmas presents, car rego and servicing, power and water bills, council rates, and so on, that make it impossible to save.

FURTHER READING: Your complete guide to budgeting >>

Budgeting 101 tip #5: Prioritise your expenses to trim the fat

At MyBudget, we organise our clients’ expenses into ‘streams.’ These get prioritised in order of importance. You can do the same with your budget. For example, essential living expenses (eg. rent/mortgage, electricity, petrol, groceries), will take priority over ‘Netflix’ or ‘Takeaway Food.’

Ranking your expenses is an excellent way to make sure you meet your most important obligations first. It can also reveal where you can trim the fat. New budgeters often ask themselves questions like ‘do I really need Foxtel, Netflix, Disney-Plus, Stan and Kayo?’

For those managing multiple debts, this ranking exercise can help with working out which debts to tackle first or what sort of payment arrangements would be affordable. In fact, it’s important not to negotiate payment terms with your creditors without first creating a workable budget. If you break a payment arrangement, creditors are unlikely to offer you another one.

Budgeting 101 tip - money automation
With MyBudget, all of your expenses and savings are planned 12 months in advance to show exactly how your goals and money are tracking.

Budgeting 101 tip #6: Build flexibility into your budget

You know the biggest challenge with budgeting? Life! Just when everything is going well, your car breaks down, water heater fails, or a global pandemic hits. This is why you need to build flexibility into your budget.

FURTHER READING: The ultimate guide to saving money >>

The way to create a flexible budget is with savings. This is money you set aside regularly that builds up into an emergency fund. It should have its own stream in your budget. To differentiate it from other saving goals, you should call it something like ‘Emergency Fund’, ‘Rainy Day Savings,’ or ‘Buffer Money.’

Keep this money in a separate account or subaccount for safekeeping. It doesn’t matter if your savings start out small. Even just $5 to $10 a week will snowball over time. You can also top up your emergency savings with one-off payments, such as a tax refund, bonus or birthday money.

Should you save or pay off debt first?

There are pros and cons to either approach and this may come down to your personal situation. Of course, having a savings buffer may help with that piece of mind but not chipping away at that credit card balance can result in the bank charging more interest.

To learn more about which approach is right for you, you could speak to a financial adviser or a MyBudget money expert who can help you to build a budget plan.

FURTHER READING: 7 ways to pay off your credit card faster >>

Budgeting 101 tip #7: Budgets that don’t balance

A balanced budget is a budget where your income is equal to or greater than your expenses. With budgets that don’t balance there is more money going out than coming in. The danger in this case is that either your savings are going down or your debt is going up. This is how a debt spiral can begin.

So, what is the right approach with a budget that won’t balance? The first step is to congratulate yourself. Instead of hiding your head in the sand, by creating a budget you have a powerful money management tool that can help you to understand, explore and fix your financial situation.

Start by making changes to your budget to see what effect they have. These are all scenarios that can be explored with your budget:

  • How could you trim your expenses?
  • What if you were to refinance or consolidate your debts?
  • You may be able to negotiate lower payments with your creditors?
  • Should you sell an asset?
  • What if you added an income stream to your budget?

Importantly, unlike Band-Aid measures, budgeting helps to uncover and fix the root of financial problems. And by getting to the underlying cause, you have the opportunity to stop them from happening again. In fact, with the right budgeting system, you have the foundation for lifelong financial success!

FURTHER READING: Too many bills, not enough money >>


eric was being chased by debt collectors. he was stressed and didn’t know which bills to pay first. Our money experts helped eric to create a customised budget. together, they analysed his situation and explored his options. the result was that eric was able to propose payment arrangements that his creditors accepted. his budget also made sure he had enough money for living and that his credit card balance was going down. the collection calls stopped and eric was able to get back on his feet.

The worry-free way to manage your money

Whatever your money goals, there is a MyBudget solution to help you reach them.

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This article has been prepared for information purposes only, and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information in this article you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.

All customised budgets and consultations with money experts are subject to MyBudget’s qualification criteria. We recommend that you read and consider our Product Disclosure Statement.

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