While it is easy to say that budgeting is one way to build towards a brighter financial future, sometimes it is difficult to know where to start, or even how to budget at all. To some, budgeting is simply the practice of sitting down, calculating what comes in, and what goes out, on a monthly basis to understand what is left as disposable income. Some people take it further and look at budgeting not only in terms of ins and outs, but also as an opportunity to question each outgoing and take positive steps to save money.

Here are some methods for budgeting success you might decide to try.

Zero Based Budgeting

Zero-based budgeting is a popular technique used in businesses, particularly when there is a strong focus on cost control. In the business sense, each department within a company is asked to justify its own expenditure and identify how much money it needs for the next period, from which a budget will then be set. While you won’t have different departments at home, you can sit down with your partner and work out what you’ll need to spend on everything, from food and clothes to luxuries like a Netflix subscription or your social life.

Sitting down to do this every month might be quite intense and tiresome, so if your income is consistent and unlikely to change in the next 6-12 months you could feasibly plan up to a year ahead. If your budgeting allows you to pay some outstanding debts off quickly then you can always sit down and refocus your budget each time you clear off a debt.

“In the business sense, each department within a company is asked to justify its own expenditure and identify how much money it needs for the next period, from which a budget will then be set.”

Incremental Budgeting

In business terms, incremental budgeting works by taking the budget from a previous period, looking at what was spent, then adding or removing a percentage based on performance. How can this work on a personal level?

The easiest way to practice incremental budgeting at home is to look at what you spent in the last six months, and look at how you can reduce your spending in each area. If you’ve already started budgeting by aiming to spend less money on your grocery shopping, for example, then you’re already practicing a form of incremental budgeting without realising it. Transfer this approach to how you shop for clothes and everything else you spend money on, and you could quickly find yourself saving a small fortune.

Debt Elimination Budgeting

The principle behind debt elimination budgeting is simple; you budget merely what you need for your essentials, and then use the rest of the money to make additional payments towards your debts. Count your regular debt payments within your regular outgoings, then you can work out how much in additional payments you are able to make. It is up to you how strict you are with debt elimination budgeting for yourself; you can keep a set amount aside within your plan for socialising or other luxuries, set aside a certain additional amounts to pay towards your debts, or take the ‘hard core’ approach and put all of your money towards debt elimination.

If you go for the latter option, this is sometimes termed as survival budgeting. Again, this term originates in the business world, and is used for individuals starting their own company, with the survival budget being what they need to live off in order to keep as much money as possible in a new business during its early days.

As an extension of this, once you are debt free you can continue this approach but instead of aiming for debt elimination you can aim to save instead.

Budgeting for Success

Instead of simply sitting down and working out what is coming in and going out, or using an app to work it out for you, put some positive thought into what you’re looking to achieve through your budgeting, and start making a real difference to your financial life today.


DISCLAIMER: This article contains factual information and general comments only so does not take into account your objectives, financial situation or needs.  Before taking any action, consider the appropriateness of this information having regard to your individual circumstances and always obtain and consider relevant disclosure documents before applying for a particular product.

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