If you read my post on why I changed my degree, you’ll know that I am passionate about personal finance. If you just know me in general, you’ll also know I love personal finance as well as a good Excel spreadsheet!
(Excel is where I have created my budget)
I thought I’d do a quick post on the basics of budgeting that I think is a great place to start when we’re looking to reach a financial goal (big or small).
Before we get to more practicals, here’s a great rule to follow if you find following a written budget difficult…
If you can’t afford it up front, don’t buy it!
I’ve done it, and I’ve seen friends and family do it, where things that aren’t necessities are purchased either on Afterpay or a Credit Card that really shouldn’t and don’t need to be. This year I put myself on a shopping ban and you know what, I haven’t missed buying new clothes and shoes at all (they were my kryptonite). I got some cash for my birthday and some gift cards so I used that to buy a few new items for my wardrobe but now it’s back to the ban. Clothes are just one example (Maccas is another, lol), but I’d encourage you to think about something that you’re spending money on that you don’t really need to be and maybe start saving what you want to spend instead of buying it or put that amount onto a loan you’re paying off. And also, if you’re budgeting well, you should still be able to treat yo self every now and then.
Anyway, that bit is for free!
It’s all for free, but here’s the budgeting part…
Over the last 9 years, since I started working full time, I’ve tweaked my personal budget a billion times and still do, but here is what it all comes down to in 3 simple breakdowns…
First, list all expenses. I define expenses as all the necessary things I need to pay for in a year. I have worked out my expenses for a 12 month period and then divide that by the number of pays I get and set aside that amount of money. For me, I get paid fortnightly so my yearly expenses are divided by 26. Some expenses may be: phone bill, rent, mortgage, health insurance, haircuts, car costs (rego, insurance, services, fuel), the list can go on. Depending on your age and circumstances, you might have only a few small expenses or some bigger ones but remember, expenses are the essentials.
Next, compare my expenses to my income (what I earn). I understand that it can be a bit overwhelming to do this if you’re working a casual job, but because you have a casual job shouldn’t be a reason not to budget. It probably is even more important to do up a budget if that is your circumstance. Now here’s the most important part – your expenses shouldn’t be more than your income. If that’s the case, we might need to take a look at what you’re defining as essentials, haha. Another thing would be to look at ways to decrease your expenses or increase your income.
Now the good part – saving and giving. With what is left over, after I’ve considered my income and expenses, is what I will use towards saving and giving (for those who are a part of a church and tithe, my tithe doesn’t come out of this giving allocation – it is included in expenses as it’s a non-negotiable for me). By doing this part of my budget last, it means that I can still be generous and still save, but I’m not struggling to pay my rent or bills because it’s all within my means. It also means that I have been able to set achievable and attainable goals too!
You may find it difficult to start with and hate setting aside money, but I promise that it will get easier and just become a habit and your future self with love you for it!
If you would like a little help starting out, or are finding it hard to differentiate what’s a necessity and what’s not, let me know. I would love to help you out (and already have a Spreadsheet we could start out on, haha).
I hope this has been helpful in some way or another!