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Budgeting is key to financial freedom, but 1-in-3 don't do it

Budgeting is something all Australians should do. Image: Getty

Budgeting is considered the first step in taking control of your finances, but one-in-three Australians are falling behind on this crucial action. 

According to Canstar’s Consumer Pulse report, 30 per cent of Australians don’t budget, while 42 per cent of Australians worry about debt. 

“Thirty per cent of Aussies do not have a budget and with all the financial literacy being pumped out, we’ve got to ask, why are we not getting through to consumers?" Canstar editor-at-large Effie Zahos said.

“Why are consumers not picking up the message that the budget is... the first step to financial freedom?” 

The report also found that women were more concerned about debt (49 per cent) than men (33 per cent), with 43 per cent of Australians worrying about it on a daily basis. 

Of those who do budget, 43 per cent use a pen and paper to budget, while 25 per cent use a spreadsheet.

Four per cent use a bucketing system, which sees certain funds allocated to different accounts and spending limits - for example, entertainment, groceries and rent. 

And of those who do budget, around 61 per cent are specifically allocating money to their savings account, although 15 per cent aren’t sure how much they are regularly putting aside. 

Around one quarter of Australians don’t have any savings, with the average Australian holding $25,000 in savings. 

How to budget

“By taking charge of your money, whether you have a little or a lot, you will ease money stress and feel more secure and in control,” Australia’s money support service, MoneySmart says. 

The first step is to track your spending to understand where your money is going. You can track it daily, weekly or monthly, but the goal is to know just where your money goes. 

“It is helpful to look at the money going in and out across a whole year. Include regular payments such as your rent or home loan, phone and electricity, car or public transport,” MoneySmart stated.

“Checking your bank statements, bills, credit card statements, receipts and shopping dockets will help you to work out all your expenses.”

The next step is to factor in how much you’re receiving in salary, welfare benefits and investments. 

Once you’ve done this, see where you can cut back and build a spending and saving plan.

MoneySmart has a budget planner you can use to build a budget. 

Then, execute your budget. When you do your weekly shop, remember how much you can spend, and apply this mentality to all areas including entertainment and holidays. 

But make sure you don’t just set and forget your budget. Six months down the track your circumstances might have changed and you’ll find that you need more money for one area than another, so reset your plan accordingly. 

Got money left over? Save it.

“The best way to save is to put money into a separate savings account as soon as you're paid and before you get the chance to spend it,” MoneySmart says.

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