the joy of budgeting–how to budget for financial success

How to budget | Frugal and Thriving

Do you hate the idea of budgeting?

Most people do.

I was an enthusiastic budgeter for seven years (I’ve since created an easier way to budget), tracking every cent we earned every week for all those years, so I hope to pass on some of that enthusiasm for budgeting.

Do you feel that budgeting your money is a bit restricting?

The bad news is that’s exactly what a budget is meant to be. A budget is meant to help you spend less than you earn and prevent you from spending recklessly (at least not too often, we all like to have the occasional splurge) and getting into debt.

On the other hand, a budget is also liberating!

It frees you from the slavery of debt. It helps you reach your financial goals. It helps you cut spending in areas where you spend without much thought, and enables you to rechannel that money to spending on things you really want.

Creating a budget is one of the first steps to being in control of your finances. It makes you aware of how much you’re earning, how much you’re spending and on what, how much you’re saving and how much you’re relying on debt. It enables you to know what your financial habits are and what your financial situation is.

There are many methods of keeping a budget, the important thing is to find a method that works well for you. A budget is a financial tool to help you reach your financial goals. As long as your budget is assisting you, there is no right or wrong way of doing it.



1. Begin by tracking your expenses. If you started tracking your expenses in January you will have some great data to base your budget on. This information makes your budget more realistic.

Further reading: Tracking your expenses

2. Organise the expenses that you tracked into categories. You might have a household category, a groceries category, a utilities category, an entertainment category. You can break your expenses down to be as specific as is useful to you.

3. Create your budget and plug in your expected income and expenses for the year. Paper and pen work fine here, but a spreadsheet can make this job much easier.

Further reading:

4. Continue to track expenses and compare them to your budget. A budget is only useful if you use it. Rather than just creating it and sticking it in a drawer to be forgotten, update your budget regularly with your actual income and expenses to compare these figures with your budgeted figures.

5. Make adjustments as necessary. Your budget isn’t set in stone. Your circumstances might change, your goals might change, expenses that you didn’t predict may come up. Adjust your budget as necessary to reflect the reality of your circumstances and your goals. It is meant to be a useful tool, not a test to see how psychic you are.

6. Monitor your progress and keep your budget up to date. Are you on track to meet your financial goals? Where are you excelling, what are your weakest areas? Having a budget makes it easy to answer these questions at a glance.

Further reading: Monitoring Your Progress


Like I said earlier, I kept a detailed budget for seven years. You get to know your spending habits intimately by keeping a detailed budget, but if you just don’t have time or the inclination, a spending plan is the perfect alternative.

The steps are as follows:

1. Automatically deduct a percentage of your income at every pay that goes towards your savings including saving for an emergency fund and irregular spending such as holidays.

2. Automatically deduct a percentage of your income to go towards a retirement fund

3. Automatically deduct a percentage of your income to go towards debt repayments

4. Allocate a percentage of your pay to committed expenses such as mortgage, food, utilities etc.

5. Spend the rest freely on whatever you like

The idea is that once you’ve got the basics covered, you don’t need to be tracking your expenses as you do in a complete budget.

The key to the success of this plan is to know how much you will need each pay for committed expenses including saving for those that are paid once a year, and not getting into debt.

The whole point of doing a budget is to avoid spending more than you earn. If ‘spend the rest’ involves putting expenses on your credit card, it won’t be long until your finances get out of hand. A popular way around this is to use the envelope system and actually withdraw and spend cash only.

If you want to know more about creating a spending plan, I go into detail about it in the Plan Save Thrive eCourse.


Creating your own personalised budget gives you customised flexibility. However, there are plenty of other options available. If you’re interested in the budget I used, you can download an Excel 93 compatible version or a 2007 version. Google docs also have some spreadsheet budget templates to use.

Below are some other popular budgeting tools:

  • The Australian Government’s Website, Understanding Money offers a free excel budget planner to download and a free app, or an alternative PDF printable version.
  • Pear Budgeting – This is a very popular online budgeting tool. It isn’t free, but at $3 per month, it’s not massively expensive. It’s popularity is based on it’s simplicity. I’ve tried the free trial, and it is extremely straight forward to use but still more effort than I want to put in at the moment. The Plan Save Thrive payday plan is automated, I like that I no longer have to spend time doing data entry.
  • Pear Budgeting Spreadsheet – A free alternative to the online budgeting tool is Pear’s downloadable spreadsheet. It’s pretty good, but limited.
  • Easy Budgeting – Another spreadsheet. I’ve paid for and tried this one. It’s not a bad spreadsheet actually. It is Australian and only $5.
  • Spendtracker – Another popular budgeting tool. I haven’t used it so I can’t say whether it’s any good.
  • Quicken Desktop Australia – I did a review on Quicken that basically concluded that it’s good, but probably way more than what the average person needs to use to keep track of their budget. I have used QuickBooks working as an accountant, and still found Quicken difficult to navigate and get used to. Quicken is based on good accounting practices and so has a bank reconciliation facility.
  • GNUCash – is another popular free online budgeting programme. It is probably more geared to small business than the individual and is based on professional accounting principles.

US based budgeting resources. Some of these can be used by non-US residents, although you won’t be able to use all the features like automatic banking and bill paying. These websites state that they plan to be ‘international’ in the future, so if you’re keen on the software, hassle them to add your bank.

  • – US based free online budgeting tool. By US based, I mean that it synchronises with your bank accounts to make budgeting and reconciliation easier.
  • Mvelopes – a US based online budgeting tool based on the envelopes budgeting system. This one is not free. It claims to support some Australian financial institutions, the only two that I could find was BankWest and AMEX Aust. The programme can still be used outside the US, but not the full features.
  • You Need A Budget – Another popular budgeting tool, to download ($60 US cost) it is based on 4 principles of money management and uses the envelope system of budgeting. While you can use it anywhere, it is only fully featured (bill payments automatic bank recs etc) if you’re in the US.

Creating and using a budget, be it a traditional budget or a spending plan, is a crucial step to take towards a better financial future. Reach your goals, increase your savings and get out of debt by using the number one most important personal financial tool: the budget.

how to budget | Frugal and Thriving