Five elements of a good budget

Five elements of a good budget

A household budget can be your best ally, helping you navigate the complicated and sometimes frustrating world of your finances.

The key, however, is to get it right from the start, so you’re on solid ground when it comes to building up your savings account.

Fortunately, it’s not hard to create a robust budget that organises your spending and leaves enough aside for a rainy day. Ideally, it just needs five key elements:

1. Plan out every cent

A budget is essentially a blueprint for what you are going to spend in the next month. Look through your past bills to work out how much you’ll need to set aside for the essential expenses, designate a number you’ll want to save each month and work out how much you have left for guilt-free spending. Be sure no stone is left unturned and watch out for commonly missed items in the budget planning process.

2. Know much you make

If you’re going to create an accurate spending plan, you need to first know how much you’re working with. There’s no use establishing a monthly savings total if it turns out you can’t afford it. So before you even start to do the above and map out your spending, first have an accurate gauge of what you’re making each month.

According to Australian Bureau of Statistics, the average weekly income of full-time employees in Australia is $1484.50 (May, 2015). Your income could be higher or lower than this, but the important thing is to know the exact figure you’re dealing with after tax. Gather up your payslips and come up with a figure. Be sure to include other relevant data, too. If you have an investment property, remember to factor in both the rental revenue you receive and, if it’s negatively geared, the interest you’re paying on your home loan.

3. Treat yourself

Keeping a budget is often seen as a chore  — particulary if it is overly stringent.  Denying yourself pleasures you would otherwise indulge in will make you resent your budget and potentially lead you to ditching it altogether.

Give yourself some room in your budget to spend money on more frivolous items.  It will help you let off some steam but stay focused at the same time. Research by Kristin Neff at the University of Texas, Austin has found that being compassionate to yourself not only improves your psychological health, it also better motivates you. 

4. Base yourself in reality

It’s self-evident that goals are an important ingredient to success. As the Harvard Initiative for Learning and Teaching has noted, numerous studies have shown that goal-setting is both empowering and helps increase motivation. 

However, in our desire to save more, it can be easy to set overly ambitious spending goals. This might include something as misguided as putting aside no money for self-gratifying spending, or assuming that you will save more than is possible. Constantly falling short of such lofty goals not only has the potential to de-motivate you, but it can also take a toll on your happiness.

5. Be flexible

A good budget isn’t set in stone. This isn’t an iron-clad contract that you’re wedded to for better or worse for the rest of your life — budgets should be regularly reviewed and amended as necessary. 

As such, you have to design and treat your budget as a living document. As conditions change — you receive a pay cut (or rise), or perhaps your home loan calculator shows a bigger repayment total this month — your budget should be malleable enough for you to shift things around relatively painlessly. When you draw it up, be sure to pick a format that lets you make changes easily from month to month. There are numerous apps and computer programs which can make the whole process remarkably simple.

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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.

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.

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.

Should I open multiple savings accounts with UBank?

UBank offers customers an opportunity to make the most of their savings by opening multiple savings accounts. Having multiple savings accounts with UBank may be ideal for savers tracking different goals in separate accounts. 

It’s important to note that to earn bonus interest, you will still need to meet the conditions of the UBank savings account every month. If you don’t make these deposits, you will receive the standard interest rate, which is typically lower. 

Keep in mind that you won’t earn bonus interest on your UBank savings account in the month an account is opened and if you open multiple savings accounts with UBank, you'll start earning any bonus interest the following month. 

It's also not yet known how long the special interest rate will hang around for, so please check with your bank for more information. 

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.

What is a Westpac locked savings account?

The Westpac locked savings account (also known as "Westpac Life") can help customers reach savings goals faster through bonus interest. Customers receive 0.2 per cent standard base interest with a variable bonus rate of 0.35 per cent when the closing balance at the end of the month is higher than the opening balance.

There are some conditions to earn the bonus interest on Westpac's locked savings account, though. First, you’ll need to increase the balance each month either through a deposit or not making any withdrawals, and then link it to a Westpac Choice account and make at least five eligible payments using your debit card. Please consult your bank as to what an eligible payment is. 

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

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.

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

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.

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 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

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.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.