If you've ever found yourself wondering where your money goes from one fortnight to the next, getting on top of your finances could be as simple as starting with a budget.

What is a budget?

A budget is one of the most basic, and probably most useful things you can do to get in control of your finances. It is simply a snapshot of your financial situation at a particular point in time, which can help you keep track of what you're earning, what you're spending, and what happens to the leftovers (if there are any!). You can then use your budget to set some guidelines for yourself when it comes to how you spend what you earn.

Creating a budget - where to start

If you've never done a budget before, or if it's been a while since you did, it may take a bit of groundwork to come up with a budget that gives an accurate picture of your financial situation - but it will be worth it in the long run.

1. Gather your records
   First of all, you'll need to gather up evidence of your earnings, such as pay slips from your employer or bank statements that show Centrelink payments etc.
   You'll also need to gather up evidence of what you're spending. Again, bank statements will show any regular direct debits that come out of your accounts (such as electricity bills etc), and receipts for any purchases you make will help you to establish what your spending patters are.
   
   
2. Choose your time frame
   You'll then need to decide what time frame you want your budget to cover. Would you like a picture of what happens to your finances each fortnight or each month? Some people find it easier to choose the same time frame as their pay period, so that all the figures in their budget correspond to each pay packet.
   
   
3. Download the My budget worksheet and fill in the blanks
   We've put together the My budget worksheet to help you create your own budget. The worksheet allows you to note down your everyday expenses, which gives you an excellent record of exactly where your money is going. The worksheet also allows you to fill in your sources of income, which it then calculates against your spending to give you a complete picture of your income versus your expenses and what you've got left over.

To view XLS files you will need Excel 2000 or later or you can download Microsoft Excel Viewer free of charge. Click on the above links to view the file or right click and choose "save target as" to download.

What does your budget tell you?

Once you've filled in the worksheet it's time for the reality check. What did your budget tell you about your spending?

A negative result?

If your total income minus your total spending gave you a negative result (i.e. less than zero) - you might benefit from some financial fine tuning! For example, you may want to look at whether you can:

• reduce your spending;
• reduce the number of credit cards you have, or maybe reduce your credit limit;
• or combine any of your loans to reduce the interest burden or the cost of ongoing fees.

A positive result?

If your total income minus your total spending still left you with money to spare, your budget indicates that you're living within your means and that your expenses don't outweigh the income you have coming in.

You may want to think about how you can best use that extra money. For example, do you want to increase your savings? Do you want to put more money towards your debts? Do you want to start investing some money?

Tips for making your budget work for you

Give yourself an allowance

Some people want to be really strict with their spending (or they might have financial commitments that leave them with very little spending money, or none at all). But, if you can, allocate yourself a small allowance - it will make your budget a little more forgiving - which means you're more likely to stick to it.

Don't forget emergency money

Try to allocate a certain amount from each pay to go towards emergencies and unexpected expenses. We've all had them at some time or another - an expensive visit to the dentist; the routine car service that turned into new brakes and new tyres as well… If you've got something set aside to cover the occasional emergency (or at least help towards the bulk of the cost), then you're less likely to find your budget being thrown off track if something unexpected occurs.

Set yourself some goals

It's useful to try and set a couple of financial goals to include in your budget. Having clear goals can help you decide what's important and also gives you an incentive to keep your finances under control. So, do you want to save up to get the car fixed? Do you want to pay off the mortgage in the next ten years? Do you want to go on a holiday next year? What do you want to work towards?

Regular reviews

Last but not least, regularly review your budget. Not only will it help you make sure you're sticking to the plan, it will also enable you to identify when your budget is no longer meeting your needs. Events such as a pay rise, or a reduction in take-home pay, a new addition to the family or taking on a new loan, all have an impact on your finances and your budget will need to change in order to accommodate them.