I find it quite surprising how many people don’t have a budget. Their income comes in, the bills come out and they just “wing it” and then wonder why they are “always poor”. If this is currently you please take no offence! It’s just something I’ve always been used to doing. Now i know that having a set budget may sound like such a chore, but a budget could be the “make or break” for your financial success.
Instead of thinking of a budget as a strict “no fun” plan think of it this way… A budget tells your money where to go, instead of wondering where it all went.
Step 1: Know what you’re spending
Before you can work out where you need to allocate your money it’s helpful to know what you are currently spending. Take a look at your online banking or bank statements and work out roughly how much you spend on different categories such as food, rent, bills etc. If you’re using cash take the next month to write down what you spend on everything…even that sneaky $3 coffee! Be honest with yourself.
Many people forget about yearly or quarterly bills when thinking of their budget. These will vary for everyone and a search through your banking may help you locate these.
Some examples are
Drivers License renewal
Christmas (it’s every year but somehow people still forget?!)
Step 2: Know your income
Along with knowing what you’re spending it helps to know how much money you have coming in to work with. If you don’t know how much you earn then now is the time to find out. Also consider anything you have coming in from government benefits, child support, side projects, surveys, baby sitting etc. Write this figure down as you’ll need it in the next step.
Step 3: Create your Budget
Now the fun part! Or maybe not so fun depending on how you feel about it…
Creating your first budget doesn’t have to be daunting and you don’t have to use some fancy ‘whiz bang’ spreadsheet (although i have included an example spreadsheet for you to use below). Simple pen and paper will do and might be good for your first few anyway.
Whether you decide to budget per month or per pay period is up to you. I find it easiest to budget for each pay period. Personally i get paid bi-weekly (or fortnightly for my aussies). Some people get paid weekly, monthly etc. Do whatever you are comfortable with.
Firstly, write down your expected income. Next, start listing out your expenses, each on a new line. It’s best to list out your fixed expenses (the ones that don’t change e.g rent/mortgage) and the ones you definitely know before listing the variable ones (the ones that do change e.g groceries).
You don’t have to categorise them but it can be helpful. If you want to see if you’ve forgotten anything have a look in my budget spreadsheet (link below) for anything you may have missed.
Step 4: Cut it out!
Now that you’ve listed your expenses out it’s time to take a good look at them. For most of you, you will be looking to either pay debt or save money.
Take your income and minus your expenses from it. If you’re left with money that’s fantastic! If not, then you need to take a good look and cut back on some of them.
Below are some of my suggestions for cutting back expenses. Now obviously you don’t have to do these but you do need to thing about what is more important to you…magazine subscriptions or a debt free future.
Things to cut from the budget:
Cancel Subscriptions (Netflix, Spotify, apple music, magazines)
Cut back on Groceries (switch to cheaper brands, use coupons)
Cut back on Eating out (limit take away and make food at home)
Ring your telecommunications providers and ask for a better deal
Speak to your landlord about your rent
Contact your utility providers and ask for a deal…or switch companies
Cut back on beauty (Do you really need fake nails, tan etc?)
Gym Membership (that you probably don’t use anyway)
Parking (can you use public transport?)
I will go through more money saving tips in a future post but have a good think about what you can do and call each of your providers to find a better deal. You can’t lose anything by asking!
Step 5: Revise and Re-work
Now that you’ve got your basic budget in place you may (most likely will) need to come back and re-work things as time goes on. This is totally fine! I re-do my budget every 2 weeks because sometimes i have to pay for one thing that i won’t have to buy in the next budget. It’s an ongoing process. I find it kind of fun but i know others don’t…