Budgeting 101: How to Set Up and Manage a Realistic Household Budget in 2022

Today I’m going to mention the most dreaded of B words. BUDGETING. Yep, gone are the days of setting a short-term budget to afford that holiday or kitchen. Now it’s appearing we need a budget just to afford everyday LIFE (and maybe a fun day out and a block of cheese) in 2022. Here’s how to make (AND MANAGE) a household budget!

Australia’s rapid inflation is making living more expensive than ever for many of us, and it’s becoming increasingly worrisome. We used to worry about affording Christmas but now we’re worried about affording the increasing costs of mortgages, car loans, fuel and even CHEESE for goodness sake.

In an effort to keep my beloved indulgences like cheese in my life for a couple more weeks, and reduce the anxiety that surrounds anything money-orientated at the moment, I know that I need to work out a household budget. So let’s seize the day and let’s get budgeting!

A budgeting expert comes to the rescue!

We’ve turned to expert Helen Baker, a financial advisor and spokesperson for to deliver all of the nitty-gritty details we need to know when setting up a household budget. But first, you need to have a clear picture of your income and spending. Now’s the time to ‘fess up’ to that daily takeaway coffee habit or secret Only Fans income stream.

Read on below for Helen’s guide to creating and sticking to a budget!

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Knowing your way around a spreadsheet will help a lot!

100% you will have this expression when calculating your living expenses. Promise. Source: Bigstock

How to create a household budget

Creating a basic budget will be your first step to making, and saving, funds. Once you’ve performed a financial audit of your life and feel in control of your finances, you’ll be ready for an advanced budget planner with greater depth.

Create an Excel spreadsheet with months in the row across the top. The first column should have all your separate income sources such as your wages, investment income, interest earned on deposits and balances, and ad hoc income such as rewards points that you might cash out. You also need to ensure your budget takes tax obligations out of your income.

In the rows underneath, have all your expenses listed out in categories, such as schooling, utility bills, mortgage repayments or rent, and groceries.

This budget might take up to three months to create a realistic working document, as you need to get a clear picture of all your spending over several weeks, and some bills might come in quarterly. Your expenses should also include loan and credit card repayments. I even recommend you forecast expenses for, say, Christmas shopping, special occasion celebrations and holidays.

Put in formulas to ensure that as you type in your expenses, total balances appear at the bottom of each row. Your goal is to be in the black, not in the red: the last row in your budget will show you how much you can save each month. For any months you are in the red, you will need to adjust your expenses, and find ways to either earn more money or reduce your spending for the period.

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If your memory is rusty on Excel formulas, try this Microsoft cheat sheet for the formulas!

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Groceries have become one of our major expenses in my home? How about you? Source: Bigstock

Tips to reduce your expenses and increase your income to ensure your household budget is in the black

Once you’ve created your budget, you’ll be able to anticipate any periods where you may need to increase your income. Of course, an easier way to avoid this altogether is simply to find ways to reduce your expenses instead.

Here are my tips to reduce your expenses on everyday items, from selling unused items around the home to getting better deals on your phone and internet plans.

  1. Switch, or negotiate with, your phone, internet and electricity plans. This could be as simple as calling your current mobile or internet provider and asking them for a better deal or shopping around using one of the many great comparison tools available online. Look for better deals on electricity and gas, internet, and streaming services in particular, as every one of these subscriptions and services adds to your ongoing expenses.
  2. Switch, or negotiate with, your home loan provider. An easy way to get a better interest rate deal with your bank is to find a similar loan with lower rates and ask your bank to match that. For better negotiating power, ensure the loan you are comparing has the same features as your own loan, such as allowing a mortgage offset account or redraw facility.
  3. Cancel regular expenses that provide little value. Identify and cancel subscriptions that you hardly use, such as media, music or movie subscriptions, as well as club memberships such as wine memberships. With any subscriptions and plans that are essential and you want to keep, see if you can go on lower-priced plans without impacting the value you get from the service.
  4. Sell household items you don’t use. Look at clearing out your home of unused objects, all of those potential money makers hiding away in boxes gathering dust. This can include CDs, games and puzzles, books, toys, whiteware, appliances, furniture, jewellery, art, electronics and antiques. Maximise the money you make through selling items by charging delivery in local areas or using social media to avoid listing and success fees on marketplace platforms. This can be the easiest and fastest way to declutter your personal space and your personal finances.
  5. Create a secondary income stream. Secondary and passive income is a great way to boost your budget in the short and long term. Maximise your earning potential outside of your primary career and look at ways to supplement your income through side-business or passive-income opportunities like landscaping, putting together furniture, decorating or painting, house-sitting, tutoring lessons or dog walking.

Once you’ve created a solid budget, finding ways to earn more money and save more money will be easier than you think. While the initial creation process can be a bit of a shock, understanding your finances and learning to master them is an essential life skill that will help keep you financially secure well into the future.

woman at lap top
Budgeting skills help you have a clear idea of where you stand financially. Source: Bigstock

Thanks for this insight and useful tips Helen, I know what I’ll be doing this weekend! #crunchingnumbers

Budgeting and setting up your initial budget might sound like a painful task but I honestly believe it’s short-term pain for long-term gain!

Setting up a budget puts you back in control of your money, enabling you to see where your expenses might be creeping up and of course, while you might not be saving as much as maybe you were a couple of years ago, there could still be a few dollars to drip into the savings pool for that holiday, kitchen reno or delicious block of decadent cheese.

Aaah, 2022, what an expensive year you are! Join our Facebook group Hot Deals Australia to make sure you snag some bargains and SAVE on your purchases!

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Join the Hot Deals Australia Facebook group and SAVE!

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Avatar of Lexi Klaebe

South Australian mum and self proclaimed foodie, Lexi can most days be found in the kitchen, apron tied firm and armed with a whisk or wooden spoon!

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