5 key steps to budgeting

3 mins read

Create a budget in five simple steps

No matter how modest your financial goals, reaching those key milestones will require discipline – and the easiest way to build discipline is to follow a plan. A budget is simply a plan to help you get a better handle on your finances, and you can create one that suits your personal situation with a few basic steps.


1. Determine your income

If you are an employee of a company, the chances are you are paid regularly and your take home salary (after tax) is around the same each month. This is your net monthly income, and the first piece of information you need to create a budget.

If you are self-employed or earning income from a variety of sources, add up all those sources to determine your cumulative income over a full year. If you own a business your income may vary from month to month, so calculate your average income over a full year and divide by 12 to create an average monthly income for budgeting purposes.

Before personal finance apps came along, determining this figure might involve gathering your financial documents, including bank statements, pay slips, investment account statements, and any other record that can help you accurately determine your monthly income. Humaniti can make this process a lot easier. Once you securely link your financial accounts to the app, we do the hard work for you to surface your incoming funds. With your average monthly income accurately calculated, you now have a starting point to budget for your expenses and savings in order to reach your financial objectives.

2. Calculate your expenses

The traditional way of calculating your monthly expenses is to prepare a list of goods and services you pay for to get a rough idea of how much you spend each month. This might include rent payments, mortgage repayments, fuel, insurance payments, utilities, groceries, clothes and dining out. Expenses such as insurance, mortgage and rent are likely to be a fixed amount each month, but you may have to estimate how much you are likely to spend on variable expenses including petrol, dining out and groceries.

When you’re signed up to Humaniti and have linked your savings, superannuation and other finance accounts, the calculations are done for you. The smart logic behind Humaniti’s personal finance app will categorise your spending, identify recurring expenses such as subscriptions, and present a view of spending that is easy to analyse at a detailed level. 

3. Subtract expenses from income

Now we get to the calculation side of planning. Once you have established your average monthly income and worked out your average monthly expenditure, deduct total expenses from total net income. This will immediately tell you if you’re earning enough to cover your expected costs. 

When your income exceeds your expenses, you have a budget surplus. This represents an opportunity to set some funds aside for longer term goals. When your expenses exceed your income, you have a budget deficit and will need to boost your income, reduce your outgoings, or both. With a budget deficit, use the 50-30-20 rule to test if your income is being appropriately allocated: 50% of your income goes towards essential expenses, 30% to your wants, with the remaining 20% of your income is set aside for savings. If you are able to lower your expenses, you will grow your budget surplus and potentially invest any excess savings.

4. Set spending limits

Once you have a clear view of your income and your monthly fixed and variable expenses, you could consider setting spending limits to each category of expenditure. This will prevent you from spending more than you’ve planned and help you build the discipline to keep you on track towards your financial goals.

5. Measure your progress

The last step in setting up your budget is to track your progress to make sure you are building your financial discipline and heading in the right direction. You may consider using a personal finance app like Humaniti to help you do this. Humaniti can help by providing a 360° view of your financial position, and by enabling a clear view of your spending in close to real time. This helps you stay focused in the short term with your budgeting plan and goals, as well as understanding the bigger picture of your personal finances.

If you don’t yet have a personal budget, now is the time to get started. You will quickly get a better understanding of your financial situation, will be set up to save as planned to finance significant purchases, and if needed, cut back on unnecessary debt. By following the five key steps to budgeting, you can create a successful budget for yourself that will help lead you to a brighter financial future.

* Disclaimer – the information in this post is general only and does not constitute financial advice. 

4 ways to stick to your budget

3 mins read

Budget tips to help you stay on track

Setting up a budget is the first important step towards better financial management – now all you need to do is stick to it! There are four specific actions that will help you stay within your budget and on track to achieving your financial goals.

As with any change of behaviour, the first weeks will require discipline until the new financial habits kick in. Humaniti is here to help you stick to your budget and stay on course to achieve financial wellbeing.


1. Track and trim your expenditure

One of the main reasons people struggle to keep their expenses under control is the failure to accurately track them. Reviewing your expenses on a regular basis provides a clear picture of the main categories of expenditure and better understanding your expenses.

Humaniti can help simplify this process by doing the work for you. When you securely link your bank accounts, the Humaniti app will automatically categorise your expenditure. Review the main categories of expenditure to understand your spending behaviour and habits and, if necessary, trim non-essential outgoings. Cutting back on small recurring expenses such as an extra coffee each day can add up to a decent saving each month.

2. Reduce your reliance on credit

Credit cards can be tempting to use on discretionary expenses, but it’s easy to overspend and rack up unnecessary debt. By paying in cash or using your debit card you have a better chance of staying within your budget as you can only spend what’s available. The process of paying in cash is also a visual reminder of how much an item actually costs and may act as a deterrent. The added bonus of using cash or debit card means you avoid paying interest on those nice-to-have items. 

When you link your debit and credit accounts with Humaniti, you will be able to track your spending and learn where you can save. The dashboard view of your monthly expenditure puts the numbers front and centre so you can easily monitor your credit card activity. Another benefit of linking all your accounts is the ability to monitor debt and interest charges. With a clear understanding of your debt, you make a critical step towards building a better financial future.

3. Consider automatic deposits

Personal finance experts recommend thinking ahead to help prepare for unexpected expenses, and to finance significant purchases. The idea of setting up emergency and sinking funds is all about keeping a steady balance of savings to avoid future financial shortfalls. 

A great way to ensure you’re saving a portion of your paycheck each month is to establish an automatic deposit into a dedicated emergency fund savings account. With an automated savings plan, your bank will deduct a specified amount on payday – as per your instructions – and divert the funds to your dedicated savings account. Doing this automatically and on a recurring basis removes the temptation to spend beyond your budget.

4. Minimise debt

With the proliferation of ‘buy now pay later’ services, it can be tempting to make purchases without thinking through the financial repercussions. If you need to borrow money to finance a purchase, a simple rule of financial discipline  is to stop and ask yourself if you really need the item right now. Delaying the decision to purchase can help prevent the problem of having to pay for the debt you’ve incurred down the track. Consider paying by cash or debit card and spending your own money rather than borrowing to spend.

Humaniti can help you stick to your budget by surfacing the key information you need to help keep your expenses in check and be more disciplined about unnecessary spending. The more money you can save and invest today, the better your chances of creating a brighter financial future.

* Disclaimer – the information in this post is general only and does not constitute financial advice.