Want to get better with your finances in 2025?

If you're worried about the growing cost of living in 2025, learning to budget can help—and the new year is the perfect time to start.

Research by the Australian Security and Investment Commission's (ASIC) MoneySmart and YouGov indicated that more than 77 percent of Gen Z males and 87 percent of Gen Z women were very stressed about the expense of living.

Meanwhile, when asked about their financial knowledge, 47 percent of Gen Z women and 38 percent of Gen Z males indicated they didn't know where to start.

Gemma Mitchell, a wealth coach and former financial consultant, believes budgeting is about making sure the fundamentals are covered.

"People get extremely caught up with the phrase budget. It usually conjures up sentiments of confinement and limitation... but it's not about that," she says.

"You want to have the entertaining stuff in there—it's not about chopping everything out. It's about making sure you can fit it all in."

How to start budgeting if you've never done it before

Personal finance is personal, and what works for someone else won't always work for you.

Ms. Mitchell says if you've never done a budget or tracked your expenditures, it can help to start with something basic.

The simplest method to get started is to just scribble down spending on a piece of paper or a notes app on your phone, Ms. Mitchell adds.

For example, following a trip to the supermarket, you could take a note of how much you spent.

"Just start writing it down as you notice items come up or when you pay them. After a month, you're going to have all those expenses written down," Ms. Mitchell adds.

"Of course, some new ones will come up over the year. But you'll have a really strong idea of the normal [expenses], and you can build on it."

It's also vital to plan for irregular expenses, such car registration and insurances.

One way is to use sinking funds for these costs—simply divide the annual total by 12 and set aside that amount each month.

For example, if you spend $2,400 each year on registration and insurance, strive to save $200 monthly.

Once you have a better handle on how you're spending your money, you can compare it to your income. Over time, you can check in to make sure your money is going where you want it.

"The end goal should be to not have to track your spending ... [because you are always] spending in line with your values and your lifestyle," Ms. Mitchell says.

Percentage-based budgeting are popular, but they're not for everyone.

Many Australians would be aware with the idea of splitting income into separate bank accounts (or "buckets") for different expenses.

Scott Pape, the author of the Barefoot Investor, advocates allocating 60 percent of your income to daily costs, 10 percent to a "splurge" account, 10 percent to a "smile" account for long-term savings objectives, and 20 percent to a "fire extinguisher" account for paying off debt or unforeseen obligations.

A comparable strategy is the 50/30/20 system—sometimes called the "balanced money formula"—which advocates for spending 50 percent of your income on "needs," 30 percent on "wants," and saving the remaining 20 percent.

Two professionals express their thoughts on whether rigorous budgeting is the correct technique to manage household cash flow.

These percentages reflect normal household incomes and spending patterns, with a higher part being set away for bills and expenses and smaller amounts for discretionary spending and savings.

Financial educator and money coach Natasha Janssens says these methods should be treated as guides rather than rules and altered depending on your circumstances.

For example, if you aren't generating a large income, you can find you are spending 50 or 60 percent of your income simply on your rent or mortgage, much alone your other costs.

"Whereas if you are a high-income earner, that [percentage-based budget] may be guiding you to overspend in certain areas," Ms. Janssens explains.

Instead, Ms. Janssens believes it's helpful to have a budget that incorporates your individual financial goals and circumstances.

The automated budgeting system that takes 15 minutes a month

Ms. Janssens has a straightforward system for her household finances, which is focused around automation. She and her husband have three bank accounts.

1. Bills account—This is the account where your income goes into, and bills are taken out. Ideally, you want your bills set up to direct debit, so they're paid automatically. That covers your rent or mortgage, utilities, and other routine bills.
2. Savings account—Each time you are paid, you automatically deposit some money to an account towards a savings goal or towards paying off debt.
3. Spending account—You also move some money to a separate account for everything else, such groceries and other day-to-day expenses like gas, parking, and eating out.

"This actually does away with your need to budget, because what happens is everything you need to cover your living expenses has gone out—your bills are paid," Ms. Janssens explains.

Treating savings much like a bill that's automatically deducted is helpful for responsibility, she adds.

Because you only have a certain amount to spend on discretionary products, the system compels you to be aware of your spending, too.

"[The spending account] is the equivalent of cash stuffing. That's putting into a debit card … and that's for food, takeaway, and whatever else.

"If we've gone a bit insane with going out to meals and movies this week, then we're having tuna and toast on Sunday. It's teaching you that compromise."

Another advantage of the technique is that it doesn't take much time to track. Ms. Janssens says she now only spends approximately 15 minutes a month confirming that everything is working as it should.

Again, the key is choosing a budget method that's perfect for you.

"You don't need to overhaul your whole finances overnight," explains Ms. Mitchell.

"Just start making small adjustments until you've found what works for you."