"Give every dollar a job"
How we budget
Over time, the budget has been streamlined so I distribute our income weekly or monthly (we get paid in different cycles) to the separate accounts, and expenses are paid from the unique accounts.
I keep it rounded up so that I am not micro-managing all expenses! It has taken a while to tweak and get the right amount per bucket.
The great thing is that you can change it whenever you want, it's yours and you decide where your dollars go.
I believe that TOO much of a budget is constricting and feels like a "scarcity" mindset that doesn't allow a good flow. Also, if you have a partner that is not enthusiastic with your finance journey they will appreciate a more flowing, relaxed approach to the monthly finances.
We have some bills that are on autopilot (recurring payments) that keep my mind free to work on the bigger picture. I like to call this a 'Levelling our Budget' so that you have a pretty smooth monthly amount being distributed. This is handy for school fees, electricity, council or strata rates and water.
There are 3 ways I do this:
Roughly work out what we want each week for groceries and odd things for the home AND we decided on $100 each for our splurge, (guilt-free spending). This has been a game-changer for us as the separate splurge accounts allow us to freely spend as we wish, thanks @barefootinvestor
I worked out what we roughly pay each year for gifts, insurances, car, school fees and divide this by 12. This amount is then moved into the 'yearly account' to draw from when these bills are due or when we need to buy gifts, clothing etc
Level out the quarterly bills. For example, water, electricity and council rates are pushed to the company each month, as a fixed amount. When I receive the bill every 3 months, the amount owing is very small, or even negative! The beauty of this method is that it is up to you. You control the amount and timing as you are 'pushing' the payment to the company
For help on HOW to do number 3:
- get the last few bills from the company and work the monthly breakdown amount
- round up and then arrange a BPay payment each month from your nominated expense account
- when you get the bill, you will notice that the 'amount due' will be very small. If it's still a large amount, tweak the monthly auto payment until you have it right. I can also change the amount per month depending on winter and summer, or if we are away for a month. As you are making the recurring payment from your bank account, you can edit whenever you want.
I round everything up to the nearest $10.00. I like zeros in my numbers and it makes me feel that I am not being too restrictive with our budget. I like to call it our financial plan instead so it's more FUN!
Here is a breakdown of our income and expenses by category.
As you can see, we have 7 bank accounts (categories).
4 accounts are debit cards:
- Daily Expenses
- Monthly Expenses
- Splurge x 2 accounts (one each)
3 accounts are online savings accounts only:
- Yearly Expenses
- Emergency Fund
- Invest In Us
RE: the category 'Taxes' ... something I am thinking about a lot more lately is taxes and super contributions. As we have less than 10 years to go when we can tap into our retirement funds, this area is the best strategy for us to invest the most of our growth $$ and we could reap some great tax deductions. More to be discussed in the coming weeks as I learn more about this myself. So I have added taxes and employer super contributions into our Finance Plan, since it is our money, why not add it into our income?!
A note to CurrentU and FutureU Know where you are at right now ....
Be honest, so that you can tackle items over the next few months. Small steps in the right direction make so much difference in the long run.
What YOU can do right now:
Write out all your expenses. It doesn't have to be an elaborate spreadsheet. You may need to write it out a few times as you start to categorise them.
Using your payslip or latest tax return, write out your GROSS income, taxes you pay, super contribution and NETT income.
What back accounts you have now and if they are online or cards
Once you have all of this recorded, you can work out your categories and also start being mindful of how much is the right proportion to invest/save. The other categories can be tackled in the coming weeks. However, working on the principle of not constricting your spending. We will be tackling some of the high-value expenses and seeing if you can reduce these numbers. I believe you go after the big dollar expenses and leave the coffees/passions alone .... you deserve them!