How to Create a Budget: Simple Step-by-Step Guide (AU)

Why You Need a Personal or Family Budget

Learning how to create a budget is the first and most crucial step toward taking control of your financial future. Many Australians see budgeting as a restrictive exercise in saying “no” to things they enjoy, but that couldn’t be further from the truth. So, what can a budget help you do? It empowers you to make conscious decisions about your money, ensuring it goes towards what truly matters to you, whether that’s saving for a house deposit, planning a holiday, or simply achieving peace of mind. A well-organised budget is a roadmap for your money, not a restriction on your life.

Essentially, what does a budget show you? It provides a clear, honest picture of your financial health by tracking your income against your expenses. It highlights where your money is going, reveals areas where you might be overspending, and identifies opportunities to save more effectively. By knowing these details, you can stop living paycheque to paycheque and start building a secure financial foundation for yourself and your family.

Preparation: What You Need Before You Start

Before you can effectively start creating a budget, you need to gather some key financial documents. The goal here is accuracy; the more precise your numbers are, the more realistic and useful your budget will be. Don’t rely on guesswork, as this can lead to a budget that’s impossible to stick to. Take an hour to collect the following items:

• Recent Payslips: You’ll need at least one or two of your most recent payslips to confirm your exact take-home pay after tax and other deductions.
• Bank Statements: Gather the last three months of bank statements to get a clear picture of your regular spending habits and automated payments.
• Credit Card Statements: Collect the last three months of statements for any credit card bills or buy-now-pay-later services you use. This will help you track variable spending and debt repayments.
• Utility Bills & Receipts: Have recent bills for electricity, gas, internet, and your mobile phone handy. It’s also helpful to keep major receipts from the last month for things like groceries and fuel to see your spending patterns.

Choosing Your Tool: Excel vs. Google Sheets vs. Software

Once you’ve gathered your information, it’s time to choose where you’ll build your budget tracker. There’s no single “best” option—it all depends on your comfort level with technology and how you plan to manage your budget. Here’s a breakdown of the most popular choices for Australians.

How to Create a Budget Spreadsheet in Excel

If you’ve chosen Excel, you’re ready to build a powerful and personalised budget. Here’s a mini-tutorial on how to create a budget spreadsheet in Excel to get you started.

1. Step 1: Open a Blank Workbook. Launch Excel and select “Blank workbook” to start with a clean slate. This gives you full control over the layout.
2. Step 2: Create Your Headers. In the first row, create columns for your budget categories. A great starting point is:
   • Column A: Expense/Income Item (e.g., Rent, Salary, Groceries)
   • Column B: Category (e.g., Housing, Food, Transport)
   • Column C: Projected Cost (What you plan to spend)
   • Column D: Actual Cost (What you really spend)
   • Column E: Difference (Actual minus Projected)
3. Step 3: Input Simple Formulas. Don’t be intimidated by formulas! Start with the basics. At the bottom of your “Projected Cost” and “Actual Cost” columns, click an empty cell and type =SUM( then select all the cells above it and close the bracket ). This will automatically calculate your totals. You can do the same in the “Difference” column with a formula like =D2-C2.
4. Step 4: Use Conditional Formatting. To make overspending obvious, use conditional formatting. Select your “Difference” column, go to “Conditional Formatting” on the Home tab, choose “Highlight Cells Rules,” and set a rule to colour any cell greater than $0 red. This gives you a quick visual cue when you go over budget. Following these steps is a great way to learn how to create a budget tracker in excel.

How to Create a Budget Spreadsheet in Google Sheets

Learning how to create a budget spreadsheet in Google Sheets is very similar to Excel, but with the added benefits of cloud storage and collaboration. The main advantage is being able to update your spending on the go from your phone, which helps keep your budget accurate.

If you prefer to build your own, the steps are nearly identical to the Excel guide above: create your headers, input your income and expenses, and use the =SUM() formula to calculate totals. The collaboration feature is where it shines—simply click the “Share” button in the top-right corner to invite your partner to view and edit the document, ensuring you’re both on the same page with your family budget.

The Core Steps to Building Your Budget Plan

Whether you’re using a template or a custom spreadsheet, the fundamental principles of how to budget are the same. Follow these three core steps to structure your financial plan.

Calculate Your Total Monthly Income

The first step in knowing how to budget your money is to figure out exactly how much is coming in each month. List every single source of income after taxes. This includes your primary salary, any income from a partner, earnings from side hustles, dividends from investments, or any other regular payments you receive. Add them all up to get your total monthly income.

Categorise Your Expenses

This is where your bank statements and bills come in handy. Go through them and categorise every expense. It’s helpful to split them into two main groups:

Fixed Expenses:

These are the costs that stay the same each month. Examples include rent or mortgage payments, insurance premiums, internet and phone bills, and loan repayments.

Variable Expenses:

These costs fluctuate from month to month. This category includes groceries, fuel, dining out, entertainment, clothing, and utilities like electricity and water.

Determine Your Bottom Line

Now for the moment of truth. Subtract your total monthly expenses from your total monthly income. The result is your bottom line.

• If it’s a positive number (a surplus): Congratulations! You’re spending less than you earn. This extra money can be allocated towards your financial goals, like boosting your savings, investing, or paying off debt faster.
• If it’s a negative number (a deficit): Don’t panic. This is valuable information. It means you’re spending more than you earn, and now you can pinpoint exactly where to make cuts. Look at your variable expenses first—can you reduce your dining out budget or cut back on subscriptions?

Proven Tips: How to Create a Budget and Stick to It

Making a budget is one thing; sticking to it is another. The key is to build sustainable habits around your new financial plan. Here are some proven budgeting tips to help you succeed long-term.

Frequently Asked Questions (FAQ)

What is the 50/30/20 rule in budgeting?

The 50/30/20 rule is a simple framework for allocating your after-tax income. Many consider it one of the best ways to budget because of its simplicity. It suggests you spend 50% of your income on “needs” (like housing, transport, and groceries), 30% on “wants” (like hobbies, dining out, and holidays), and the remaining 20% on “savings” and debt repayment.

How many months does it usually take for your budget to start working?

It typically takes around three to four months to refine your budget. The first month is often a trial run where you’ll discover expenses you forgot to include. Over the next few months, you’ll get a more accurate average for your variable spending, allowing you to create a budget that is both realistic and effective.

How do I create a simple budget for beginners?

For absolute beginners, the best approach is to start simple. You can use a pre-made budget template from Google Sheets or Excel to avoid setting up formulas. Another popular method for budgeting for beginners is the “envelope method,” where you allocate physical cash into labelled envelopes for different spending categories (e.g., “Groceries,” “Fuel”). Once you get the hang of tracking, you can move to a more detailed spreadsheet.

How can I budget and save money simultaneously?

The most effective way to budget and save money is to treat your savings as a non-negotiable, fixed expense. When you build your budget spreadsheet, create a line item under “Fixed Expenses” called “Savings” and decide on a set amount to transfer each payday. By prioritising it this way, you ensure you save money before it can be spent on other things.