As we all know, everything seems to be getting more and more expensive, and so often I hear people wondering where all their money goes, but without having a budget or tracking your expenses, it is impossible to tell.
Creating a Budget
Budgeting doesn’t need to be done in any fancy program or document – it can be as simple as writing this out on a piece of paper, but here are my steps for success when creating a budget:
- Set aside one night to sit down and go through everything – don’t try and do this in the ad breaks while watching your favourite TV show!
- Be prepared – you’ll need to know what your regular bills are such as council rates, mortgage, rent, loan repayments, power, gas, water, phone, subscriptions, insurances, car registration, etc. – these are the essentials and things that are permanent and ongoing.
- Start with your income – and look at the income that you receive in your bank account each pay (this is obviously a little more difficult if you are self-employed or if your income fluctuates, but try and do this on a more conservative basis so if anything you have extra leftover when your pay is higher) – and convert this amount to a weekly basis.
- List each your fixed expenses/repayments (see point # 2 above) – and also convert these to weekly amounts.
- Then start to add in your other expenses that are more variable – groceries, cigarettes, eating out, fuel, car servicing, pharmacy/medical, entertainment, gym, alcohol. Here you may need to check back through recent purchases to see what you spend on average (this may surprise you!) or simply give yourself an allowance for each category.
- Now add up all of your expenses, and deduct this from your income – and hopefully you have a surplus leftover!
Review and Revise
You may not think of everything to start with, but you can always revise and add extra items if you find you’ve missed anything or need to adjust some of your budgeted figures. Every household is different, so this won’t be the same for everyone, so you need to think about what is relevant for you.
If you find you don’t have anything leftover, or even if you do have money leftover, take this opportunity to start reviewing your expenses and seeing where you can possibly reduce or remove some unnecessary expenses.
Check out my social media for some great money saving tips which could make some serious impact on your regular expenses.
Don’t Forget to Save!
Ideally, you want to be adding in your budget an allowance for savings too – whether that be for holidays, new car, deposit towards a large purchase… anything! Set up an interest earning savings account and automate a regular payment each time you get paid to go towards your savings account. Or better yet, get your employer to automate this from your salary so you don’t even see it and need to manually transfer it yourself. And then don’t touch these savings.
What’s even better is if you set this up with a bank you don’t normally bank with, so you don’t see it when you log in to your regular internet banking. Out of sight, out of mind.
What About Me?
Don’t forget about yourself! We still need to live a little, and sometimes splurge on things we “want” rather than “need”. Try and budget an allowance for spending money on yourself. There is nothing wrong with just being able to buy something for yourself just because you want it – but you need to budget for it.
Similar to your savings, you could set up an individual separate bank account for your own personal spending, so that it doesn’t look like it’s coming out of your usual account to cover the usual stuff like bills and groceries.
If you’ve got something in mind you want to buy, you may need to save up for a few weeks or months even, but when you do buy it, it’ll be guilt-free as you won’t have had to sacrifice on other things for it.
Make it fun!
A trick that I’ve found that works is to make budgeting a bit of a game… You need to set the boundaries and rules upfront, and challenge your partner to stick to it also.
There needs to be rewards if you stick to it, and penalties if you don’t stick to it, so that there are consequences. You could be surprised at how much you could save at the end of each month.
There is help available
As I mentioned, this doesn’t need to be anything fancy, but there are some great tools available online if you want to be able to edit your budget. There is a great one available either online or a downloadable spreadsheet on the MoneySmart website here.
I am also here and happy to have a chat if you would like any guidance around this matter, as I’ve reviewed hundreds of clients bank statements and helped with budgeting, so am happy to assist wherever I can.
