Your budget cheat sheet

Yes, it's the kind of conversation topic that sees eyes glazing over and yawns being stifled, but setting a budget - and sticking to it - can actually be one of the most exciting things you can do for your financial health.

Research suggests some 85% of Australians have no idea how much they’re spending every month. The money comes in, and goes out again, with most of us none the wiser as to where it was spent, and what it was spent on.

This is where a good budget comes in. Yes, it can feel like a lot of careful planning – and then painfully deciding just what you’re willing to do without – but… once you see those savings start to stack up, or you reach one of your financial milestones (be it becoming debt free, taking a holiday or going on a splurge-heavy shopping spree), you’ll be over the financial moon.

And it doesn’t even need to be complicated. Here are three of our favourite budgeting techniques that will have your savings soaring in no time.

How the 50/30/20 budget works

This is the budget for people who hate budgets! It’s a simple system where you divide your income into three areas: needs, wants and savings.

To keep the math simple, let’s say you take home $1,000 in after-tax pay per week. This budget would see you spending 50% (or $500) of your income on needs, 30% ($300) on wants, and putting the remaining 20% ($200) into savings.

The only tricky part is figuring out what expenses fall into each section. Your needs are, of course, what you can’t live without: things like rent or mortgage payment, bills (including your mobile phone) and grocery costs.

But a life filled only with responsibility is no life at all, so the next 30% gets splashed on the things that actually make you happy, be it new clothes, streaming services or eating out with family and friends.

And the 50/30/20 comes with a built-in safety net, with the final 20% put into savings for a rainy day, or just so you can watch your balance climb and climb.

This budget only works if you’re honest with yourself about what is a need and what is a want. Do you need Netflix (and that large home-delivered pizza to watch it with), or do you want it? What about taking a taxi, when you could have taken the train or bus?

The bucket budget

Remember envelopes? Those paper things we used to use to send letters in before the internet arrived en masse to render them largely redundant.

But they also had another use. Our parents (and their parents) would split their take-home money, which was usually paid in cash or a bank cheque, into envelopes marked “rent”, “mortgage”, “groceries” or “school fees”. That way, they would always know they had enough money to cover their expenses, and could never overspend (well, not without raiding another envelope).

The system still works (even if envelopes are now as rare as a VHS player), and the modern incarnation of this tried and tested budget is called the bucket system.

Now, they’re not literal buckets, of course. Instead, set up multiple no-fee accounts (you can even nickname them the same thing you would have written on the envelopes) and split your income between them.

You can have as many as you’d like, maybe start with accounts called “home”, “bills”, “transport”, “groceries”, “fun” and “savings”. You then simply tally up what the first four will cost you each month, and whatever is left gets put into savings.

Again, there is a measure of self-discipline required here - it’s your money, after all, so no-one will stop you borrowing from another account to feed your fun - but should you stick to the program, you’ll see the savings bucket starts to swell.

Expense tracking

No matter what budget you settle on, the only way it will work is if you really, truly know what your monthly expenses are, and where you’re currently spending your money.

There’s nothing worse than having yet another month fly by with nothing left in the account, and nothing tangible to show for the money you’ve spent.

That’s where expense tracking comes in. And don’t worry, that doesn’t mean going through your statements line by line and entering it all into a spreadsheet. There are all sorts of apps and programs that can link up with your accounts and credit cards and deliver you a handy report of where your money is going.

Knowledge is power when it comes to budgeting, and now, more than ever before, it’s at your fingertips.