Budgeting. A necessary task in successfully managing your money, but it can be overwhelming and hard to know where to start. And let’s face it, there are hundreds of different ways to do it, and plenty of people offering a quick fix if you would only subscribe/buy their book/pay a fee etc. Yeah right……
Budgeting can be easy, you just have to find the right strategy that suits you right now. Basically, it comes down to following one simple rule.
Don’t spend more than you earn!
You can certainly forgo a budget and just wing it, but you’ll never be able to be on top of your finances if you don’t know how much of it is coming in and going out. You don’t want nasty surprises of an unexpected bill arriving just when you’ve emptied out your savings account.
Em and I will give you different ideas, and you can just pick and choose what suits you right now, as you can always adjust it down the track, or give it a complete overhaul if your priorities or situation changes. So let’s start with two simple steps:
Step 1: Work out your income
This is super easy if you’re on a regular salary and it’s the same every week, harder if you’re casual or have a fluctuating income. Do you earn a base rate, plus a bonus/commission/penalty rates? If your income varies, have a look at your pays for the previous 6-12 months. Make a note of the different amounts and where the highs and lows are. Is it seasonal? Take into consideration any returns on investments etc.
Step 2: Consider all your expenses
Include utility bills, car and home expenses, and the all-important “miscellaneous item” (see note below). We’ve provided a couple of templates that should cover most of the items you need to consider, but please make sure that you adapt it to suit your individual needs.
Note: Most people will tell you that you need to write down everything that you spend money on, but this hasn’t worked for Em or I so we don’t recommend it. What we’ve found that does work is to have a miscellaneous item included in your budget. This covers all the extras that crop up like coffees, lunch out, birthday presents, chemist prescription etc. Ensure you allocate a reasonable amount here to ensure you can cover everything, but make sure the amount you set for the miscellaneous category is what you stick too!
So that’s it, all you need to start budgeting. Check out our two templates to help you get started.
Our Budget Template lists as many different general expenses that we could think of. There will be plenty that we’ve missed or are unique to you so add and delete as necessary.
Our Yearly Forecast Template is a spreadsheet to see at a glance when expenses are due.
Look out for more posts as we go further into the world of budgeting and show you how we manage our finances and tips that we use to save money….