What is a budget?
When you have your own money, you probably also have some ideas about how to spend it – whether that’s treating yourself every week to an ice cream or saving for a new gaming console. You also may need to put money aside for things like school supplies. A budget is a plan to help you manage your money and achieve your goals.
Why do I need a budget?
- A budget could help you to stay in control of your money. If you aren’t paying attention, you could end up spending more than you are getting.
- It could also help you put the things you need first, and make sure you are paying for them before any extra spending.
- And a budget allows you to see how long it may take you to save enough money to buy certain things or reach savings goals.
Parts of a budget
These are the key things you need to include in a budget:
- Income: What money do you have coming in? This could be an allowance, money for chores or small jobs, and money you get for special occasions.
- Expenses: What money do you need or want to spend every week or month? Right now, your “need” expenses won’t be a lot. You may need money for school lunches or bus fares.
In future, these expenses will include things like paying for somewhere to live, your phone, electricity, and groceries.
Meanwhile, your “want” expenses are extra treats, like mobile games or doughnuts.
- Savings: You should also put away some of your money to save for a bigger goal or keep for the future.
Goals and timelines
When you have something specific you want to buy, a budget that looks at your income, expenses and the cost of the item may help you work out how long it will take you to get it. This is especially important if you want or need to purchase something before a specific date.
If you have a bank account with Westpac, the Westpac App has a Savings Goal1 feature that allows you to create a personalised goal and set up an automatic transfer to help you reach it.
Example: when will Rohan get his figure?
Rohan collects figures from his favourite show, and he only needs one more to complete a set. It costs $100 and he really wants it before his birthday, which is in 11 weeks.
He gets $20 per week from his parents as an allowance. But he has planned to save $5 per week, and also needs $5 per week for bus fares.
Here’s how Rohan worked it out:
Step one: Rohan listed out his goal, income, expenses and savings.
- Goal: $100
- Weekly income: $20
- Weekly savings: $5
- Weekly expenses: $5
Step two: Rohan subtracted the weekly savings and expenses from the weekly income.
- $20 - $5 - $5 = $10 per week
Step three: Rohan divided the goal, or the cost of his figure, by the weekly amount he was left with.
- $100/$10 = 10 weeks
Following these steps, Rohan worked out that he will be able to buy his figure in 10 weeks – one whole week before his birthday.
Activity time: How long will it take you to buy these items?
Complete the same steps that Rohan did to work out the amounts, then scroll to the bottom of the page for the answers.
1. You want to get a new console that costs $300. You get a $30 per week allowance, but you save $10 per week and spend $5 per week on collectable cards. How many weeks will it take you to get the console?
2. You’ve seen some new boots that you would love to have in time for your best friend’s birthday party in 6 weeks, and they cost $75. You get a $15 per week allowance. You don’t have any other expenses and don’t plan on saving any other money. Will you be able to save enough in time for the party?
Answers:
- 20 weeks.
- You will take 5 weeks to save so you will be able to save in time for the party. Yay!
Things you should know
1. Savings Goals: Both an account holder and an authorised user can use the Savings Goals feature, including to view, add, edit and delete the savings goals on a Westpac Life or Bump account.