How do I work out what I can afford?

You're not alone

When money is tight, working out what you can actually afford can feel daunting. But a simple budget is one of the most powerful tools you have — it shows the real picture and helps you make offers you can keep.

This is general information, not financial advice. A free financial counsellor can build a budget with you — National Debt Helpline 1800 007 007.

Your first steps

You don't need fancy software — a piece of paper or a notes app is fine. Gather:

• Your income — wages, Centrelink payments, any other money coming in.
• Your essential costs — rent or mortgage, food, power, water, transport, medicine, insurance.
• Your debts — the minimum or agreed payment on each.

Step by step

1. Add up your income for a week or fortnight (whatever matches how you're paid).
2. Add up your essentials for the same period.
3. Subtract essentials from income. What's left is roughly what you have for debts and savings.
4. Divide what's left between your debts, focusing first on the most important ones (such as rent and utilities).
5. Keep a small buffer if you can, for unexpected costs.

If there's nothing left after essentials, that's important to know too — it tells creditors and counsellors that you genuinely cannot pay right now.

Good to know

Be honest and realistic — it's better to offer a creditor a small, steady amount than to over-promise. You can also check whether you're entitled to concessions, rebates or grants that free up money. A financial counsellor can help, and you can explore terms in our glossary.

If working through your finances is stressful, Lifeline 13 11 14 and Beyond Blue 1300 22 4636 are available.