Budget Planner: How to make a monthly budget

Budget Planner: How to make a monthly budget

Having a goal — whether it’s saving up for a home loan deposit or building up a rainy day fund — requires financial discipline. You have to set constraints on yourself and do everything you can to make sure you’re putting away the requisite amount of your income toward your goal. 

The traditional, and arguably most effective, way to do this is to draw up a budget. A budget will essentially outline where your money will go for a particular period of time, whether a week or a month, before you get around to even spending it. By pre-empting your expenses and organising them, you have a better idea of how you can save even more, and what activities to cut down on. 

No one said this was easy. As standard as making a budget is, if you don’t have experience with how to budget, it can be quite the laborious task so we have a budget template that will help you on your way, plus some useful tips that will help you make sure that money is flowing into your savings account as it should.

List your expenses

The very first thing you should do is make a list of your weekly and monthly expenses. This means everything, from the muffin you buy every Thursday lunchtime at that cute little bakery down the road, to your bills and rent. 

You’ll want to note down everything and group it under categories like:

  • Transport
  • Bills
  • Food
  • Leisure

Now you know exactly where your pay cheque is going, as well as where to reduce your spending. If you’re shelling out a lot on bills, for instance, it may be time to cut back on your energy usage. If leisure and entertainment is costing you plenty, then a lifestyle change may be necessary.

Decide how much you need to save

If you haven’t yet figured out how much you actually need to save, then this is a good point at which to do so. Work out the cost of the particular goal you’re saving for. You won’t necessarily be able to nail down an exact sum for every goal — some have a cost that can only be approximated. Nevertheless, it’ll give you an idea of what you should be aiming for.

Then, jump onto a savings account calculator and see how quickly your savings will grow. This will give you an idea of how much you need to save each month. 

Work out where your priorities lie

Once you know where you’re putting your money, it’s time to work out what your biggest priorities are. There is a big difference between wants and needs. Obviously, bills, including insurance payments, are mandatory. Same with rent and, to some extent, transportation. Finally, the amount you’re moving into your savings should be off limits. 

Everything after this, including food, is discretionary spending. You can always save more by eating a little less luxuriously or taking fewer trips to the cinema — not to mention skipping the weekly drinks session from time to time. These are all less important, and so can be played around with.

Track your spending

Tracking your spending with a budget planner will help you understand where your money is going and keep you focused on your goals.  A simple budget template will get you started, or there are countless electronic tools that you can use to make this process simple. For instance, the Australian Securities and Investments Commission’s MoneySmart website has its own “TrackMySpend” app, which lets you record your expenses on the go. There are also many other commercial apps made by private designers. 

Start an automatic savings plan

You’ve comprehensively planned out your spending and made sure to leave those lunchtime muffins out of your regular expenses. You know exactly where your money is going and how much you’re meant to be saving. 

But making a budget and actually having the discipline to stick to it are two different things. In order to help ensure you aren’t tempted to spend the money that should be going into your savings, start an automatic savings plan, so a sum of money is transferred from your regular bank account into your savings account without you having to do a thing.

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Learn more about savings accounts

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

What is an ANZ locked savings account?

An ANZ locked savings account locks your money and prevents you from spending. You may use a standard savings account as the account where your salary is deposited. You can then withdraw funds when needed, but aren’t able to make purchases with it. However, this account may not grow much as the continual withdrawing of funds will limit the interest you can earn.

With a locked savings account in ANZ, you know your savings will grow because you can’t access the money. You can also qualify for a bonus when you deposit at least $10 per month and don’t make any withdrawals. To help you with this further you can set up an automatic transfer from your regular ANZ savings or transaction account so you don’t forget to make a monthly deposit.

Your ANZ locked savings account offers you a base interest rate of 0.1 per cent per annum plus an additional bonus interest of 0.49 per cent per year. The interest is calculated daily and credited to your account on the last working day of the month.

Should I open a Commonwealth locked savings account?

If you have trouble saving money, a Commbank locked savings account could be a potential solution. A locked savings account won’t let you make withdrawals and as such, it can help you grow your savings balance if you keep topping it up. 

The Commonwealth locked savings account advertises high-interest rates and minimal maintenance fees, along with a host of other incentives that will encourage you not to touch the money. 

The account offers a higher interest rate for each month that you make limited or no withdrawals, as well as regular deposits. 

To qualify for a Commonwealth locked savings account with the advertised features, you will need to fulfil specific criteria such as:

  • Depositing a fixed minimum amount into the account every month.
  • Making a fixed number of deposits each month.
  • Making a minimum or no withdrawals each month.
  • Maintaining a minimum account balance.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

Can you have multiple ING savings accounts?

Yes, you can open up to nine accounts with ING at any particular time. If you’re saving money for various goals, such as buying a car or taking a holiday, you can name each of your multiple ING savings accounts differently.

To get a Savings Maximiser account, you’ll need to deposit more than $1000 every month and make at least five additional purchases. If you also want to grow your savings, from 1st March 2021, you can earn up to 1.35 per cent per annum variable interest on one account with a balance of up to $100,000 when you also maintain an Orange Everyday account.

With ING, multiple savings accounts can help keep track of all your savings goals. All the accounts offer flexible withdrawals where you can withdraw as low or as high as you want without impacting your earning interest rate. However, you can only earn the bonus interest on one account. To apply for a Savings Maximiser account, you can visit ingdirect.com.au.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.