A new financial year has dawned, and while you might be busy preparing your taxes from last year, early July is also a great opportunity to start thinking about your goals for the year ahead.

That starts with a budget, but working out what to include and how to stick to a financial plan can be a struggle, particularly as the rising cost of living makes it harder to stay on top of the bills.

Amanda Thompson, founder of Endurance Financial, said that Australians often dread the “B” word and that it can be helpful to reframe the exercise in a much less rigid and prescriptive way.

“When we think about the word ‘budget’ we think about penny pinching, sacrificing enjoyment for financial stability and living within limited means,” Thompson said.

“It is far more practical to set a forecast, or spending plan, and adjust it as often as necessary to suit the needs of an individual.”

So, what are some ways to make the process easier?

Starting out

The first step is finding a place to structure your budget, and it doesn’t have to be complicated.

There are, of course, no shortage of fancy phone apps that promise to itemise your finances down to the dollar, but often the simplest (and usually cheapest) option is a digital spreadsheet.

It could be in Excel, Google Sheets or Apple’s Numbers – all of which are widely available.

You can even access a government-approved template for your spreadsheet online, which will come pre-populated with a series of general expense categories to get your journey started.

In-goings, out-goings

The next step is allocating all of your incomings and outgoings, which is basically just a breakdown of all your income and expenses.

For most people that’s wages coming in, bills and discretionary spending going out; though others may have more complicated arrangements such as income from investment returns.

The best way to work out what expenses you’ll want to list in a budget is to look through your bank statement from the past month and itemise major recurring spending.

Also consider projecting out what your expenses cost on a weekly, monthly, quarterly and annual basis because those estimates will help you understand where you can make easy changes.

Setting goals

You’re also going to need some financial goals, otherwise your budget isn’t necessarily leading anywhere.

Thompson said that it can be useful to set goals that don’t feel restrictive and can be changed as your priorities shift.

“Budgets are designed to help you meet financial goals, the problem being if you are told you must restrict yourself in any sense, the task automatically becomes laborious and feels like a chore,” she said.

“If we instead tell ourselves that we have a spending plan, we no longer feel restricted or inhibited.”

Experiment

The benefit of focusing on flexibility when making a budget is that you’re able to experiment with how you’d like to meet your goals.

For example, if you have your eye on an overseas holiday, you can pull together an estimate of how much savings you may need and then play around with what costs you might want to cut to get there.

You might then change that after a few weeks if there’s a particular expense you want to re-introduce.

The key is that with a spending plan or budget you can see what affect particular decisions will have on your goals, keeping you in control.