I’m going to give you my tips on how to budget. My philosophy is that you need to know how much money you have coming into your bank account and not spend more than that. I know this sounds simple and kind of brutal, but it really is that easy when you break it down.
Write down your budget in a notebook or in an Excel spreadsheet, it doesn’t matter, the key is knowing your numbers and sticking to them. There are several variations on how to budget and there are many theories around what budgeting should look like. Don’t overcomplicate it and do what works for you.
Here are my tips on how to budget.
Work out your goals
What do you want to achieve? Do you want to clear your debt, save for a house or a go on a family holiday? Know what you want and write it down.
What are you spending?
Work out your monthly income and expenses (use bills and your bank statements to help calculate this). There are resources available online ( Moneysmart have an incredible online budget planner that’s free click here to access it).
One source for purchases
Use one source to make all your purchases. I am not a fan of cash envelopes. I find a debit card where I can view my account and track transactions is best. I use a credit card (for points) which I pay off immediately, it has no fees as it is linked to my mortgage. Do not get a credit card unless you are 100% confident you will be able to pay it off as you make purchases. Use a regular debit card.
Think about an emergency fund
Factor an emergency fund into your budget. I aim to have enough money to cover 3-6 months worth of expenses in my emergency account. If you are in financial stress and are working to pay off debt, I would aim for $1000 initially until you’re ready to beef it up (this is Dave Ramsey’s approach and I think it’s brilliant).
Now it’s time to make changes and take action. Not enough money to continue your existing lifestyle? What this might mean for you is:
- Cancelling subscriptions.
- Spending less on your grocery shop (see how here).
- Spending less on clothes (see how here).
- Calling your bank and ensuring you are on the right plan if you have credit card debt. This is important, I have seen too many people scared to make a change. CALL YOUR BANK and if they don’t help CALL OTHER BANKS to ensure you are on the lowest rates possible. Consider a balance transfer. Don’t apply for additional credit cards to only deepen your debt, it’s better to slowly chip away at your debt and gradually pay it off.
- Jump onto Energy Watch to ensure you are with the cheapest energy providers – If you aren’t, change providers and if you are, ask for a discount!
- Shop around your insurance providers for everything – health, home and car.
- Use loyalty programs like Woolworths Everyday Rewards and Cash Rewards – sign up here and earn an additional $10 off your first qualifying order (affiliate link) – They are free and they are additional ways for you to save and earn money!
You may do your budget and find you have a surplus of cash! That’s great – ensure you’re spending it right, remember your goals. Speak to your bank and make sure you have an appropriate high-interest savings account or an offset account if relevant.
Set yourself item limits with how much you are permitted to spend. If you can’t afford to eat out weekly, DON’T. Make the necessary changes, take the necessary steps. Only you know what needs to change to reach your goals and achieve financial freedom. Don’t forget that every change is getting you one step closer to what you want – and you can still have fun!
Above all remember your plan will always be the best plan. Do what works for you and your family.
Once our salary is deposited, I transfer funds straight into the necessary savings accounts. Bills are either paid via direct debit or credit card. I know exactly what money is coming in and what money is coming out.
Debt isn’t a bad thing … Well, we know it’s not ideal … but the damage is done! Don’t beat yourself up about it! It’s what you do today and the actions that you take that will help you move forward. Stop telling yourself stories of what you can afford, be intentional with your money, focus on your goals by creating a budget and take back control.