The art of budgeting with Jess Irvine

You can do it with a spreadsheet. You can do it with an app. You can do it with a good old-fashioned pen and paper. The good news is you get to budget however works best for you: there is no one size fits all!

Budgeting sometimes gets a bad rap, but a budget is really just a plan for your money. It's a tool to help you feel more in control of your finances, and a way to give you visibility over where your hard-earned cash is going. 

The good news is that a lot of us are already doing it – research from CommBank has found that 61 per cent of Australians currently budget or use a budgeting tool. The not-so-good news is that a third of Aussies believe their current budgeting methods are ineffective in managing their finances.

So, if you're one of the Australians who aren't budgeting – or feel like your budgeting approach isn't working – how can you start building better budget habits?

Watch the full video above to learn some of CommBank's personal finance expert Jess Irvine's top tips.

Start simple – take the 'money diary' challenge

First thing's first, it's time to dispel a myth: budgeting isn't about setting yourself impractical targets for your spending, like pledging to live off baked beans. 

"​​Many people struggle initially with budgeting because they start with an unrealistic idea of where their money actually goes," says Irvine. "They set unrealistic limits for their spending and give up when they can't keep to those limits."

Instead, a good budget starts with simply understanding where your money really does go – and what's actually leftover to save.

A great way to get your head around it all is to keep a money diary, AKA a log of every dollar you spend for a week or a month. You don't have to try and cut back. The idea is to simply see where you're spending. 

Irvine recommends diligently recording every purchase you make, from big bills to the little things like coffees, noting the date, a short description of the expense and how much it cost. And "be sure to check your bank account regularly to keep up with any direct debits," she adds.

Then, at the end of the week or month, reflect on those purchases – and how many of them were 'wants' versus 'needs'. "When you do start to write down everything you spend, you'll probably be surprised at how it all adds up," Irvine says.

Next step: make the budget that works for you

Now that you know where you're spending, it's time to make your budget. There's a few different methods you could use, just pick the one that works for you.

A simple and effective budgeting approach for beginners is to split your money into three 'buckets' – setting aside 50 per cent of your income for your needs (like rent and groceries), 30 per cent for your wants (like socialising and shopping) and 20 per cent for savings. 

"But those percentage splits might not work for everyone, and you have to tinker and find out what percentages work for you," says Irvine.

Or you could take the old school approach – and use the 'cash envelop' method. Simply withdraw your weekly budget from the ATM and put in an envelope, with the aim to only spend from the cash you have. If you spend it all, you have to stop spending.

The envelope method can be a great strategy for those who regularly overspend, says Irvine. "But it doesn't work for all budget categories, particularly ones with direct debits, and some people don't feel safe keeping too much cash on hand."

Finally, you can just keep tracking your money – not necessarily setting hard limits, but simply checking to see that you are spending in a mindful way and one that aligns with your life values and goals. Think of it like sticking with the money diary challenge long term – "but also tracking your income and resulting budget surplus or shortfall over that time," says Irvine. 

The budgeting bottom line

It's helpful to look at budgeting as a way to reach your short- and long-term goals.

With a budget, you've got a picture of what surplus funds you may have at the end of the day to put towards your money goals – whether that's saving for a house deposit or a holiday. 

"Budgeting is not something that you should be afraid of," says Irvine. "It's a tool you can use to build the life you want and make your money decisions with confidence." And doesn't that sound nice?

Feel more confident about your relationship with money and start your financial fitness journey with CommBank today.

Discover a brighter side to money with tips on how to strengthen your savings muscle, master your money mindset and get your cash flow working for you. Learn practical steps to make your money go further today and plan for a brighter tomorrow at honey.nine.com.au/commbank

Source: CommBank Research 2024

This page provides general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as personal financial product advice. As the information has been provided without considering your objectives, financial situation or needs, you should, before acting on this information, consider if it is appropriate to your circumstances. You should also consider whether seeking independent professional legal, tax and financial advice is necessary.