I get quite a few DMs and comments on Instagram asking how I budget, what tools I use and how I got started on my journey to financial stability – so I’ve decided to brain dump the lot into this blog post.
This post is coming to you from the air conditioned confines of my living room on a sweaty 37 degree Friday afternoon, and I’ve currently got an excessive amount of chewed up cheese and onion crisp stuck in my molars. It’s one of those days.
Ok, my budget. Here goes.
I work out my budgets 2-3 months ahead, and I have a very unbalanced approach when it comes to online/offline record keeping and organisation! Some things are online only, others I can’t function without a pen and paper!
My calendar is all online – Google Calendar is life. That’s because I used to use a hard copy and the two single occasions on which I went out without it, I double booked myself. So I moved online.
Aside from my calendar, most of my budget-related jottings live offline. I know, bad social media girl. But when it comes to numbers and lists and brain dumping, I work better with a good old fashioned pen and paper.
So I look ahead at the season ahead and the coming 8-12 weeks, and see what’s coming up. Some months it’s all birthday dinners, work trips and summer festivities, and others it’s just me and a pouch of pre-made pumpkin soup on the couch without anything to chomp up my money.
Budgeting with your calendar in mind is important, as it’ll help you be realistic. There’s no point committing to live off $100 a week if it’s the month when you’ve got 3 birthdays to attend and presents to buy. It just won’t work.
Then, I tot up my weekly fixed costs (lol throwback to year 12 accounting) – generally these are constant, but I check in to make sure nothing’s changed. This involves calculating how much I need to pay from each paycheck to cover my mortgage, bills and direct debits – oh and a small amount into an investing app called Raiz.
For me, this is currently 40% of my income.
Then, I take the remaining 60% and decide what to do with it. Currently I’ve got 20% into mid-term savings (mostly for a trip to America in 2019), 20% to credit card and student loan account, and 20% to live on and spend. Some weeks I put away 5% into cash savings and live on 15% instead.
My cash savings are my ‘splurge’ savings. I like to have a couple of hundred dollars hanging around for if I want to treat myself to something.
I’ll have an end date for each type of budget – currently that’s December 31.
I’ll have a number in mind for my savings account of how much should be in there by that date.
Then, after that date, I’ll review my savings, look back at how I was doing on the previous plan, and tweak to suit what’s coming next. The next 3 months after December are summer in Australia, so my discretionary spending might be higher. My mum will be visiting from the UK, and we’ll be going to the Australian Open for several days, which means there’ll be some treat spending, so I’ll account for that when I work out how much is going into savings. By contrast, the months from June – September will be pretty lean for me as we’re going to America for 3 weeks after that, so I’ll probably make some sacrifices to squeeze a bit more into savings. After all, it’s only 3 months.
Tracking my Spending
Some people love Excel for expense tracking – my boyfriend is practically glued to a spreadsheet for 79% of the day. But like I said, I’m a handwritten girl.
I write down what I’ve spent that 20% of my income on each day in my Kmart Budget Book. It was $3 and has an expenses section for each day, and a weekly notes section. It’s helpful for me to write down things like ‘budget $20 for wine with girls’ or ‘alpaca festival on Sat’. You know, life’s essentials. (ps I really like alpacas)
If I spend anything that’s a bit out of the ordinary, and outside of the usual food, transport, petrol, and one or two social occasions, I’ll highlight it so I can identify patterns.
On my current budget, I account for 1-2 instances of spending for leisure. That might be in the form of a meal out or a few drinks at happy hour. But for example, last week, I had a takeaway on Sunday night with my boyfriend, and that wasn’t planned. So that got highlighted. The winery visit on Saturday wasn’t highlighted, as it was planned.
What if Something Comes Up?
If something comes up that the 20% won’t cover, I’ll either withdraw it from my savings that I’m adding to each week, or ‘borrow’ it from my joint savings I have with my partner. We have a bit of money offset against our mortgage that we use for things like vet bills and unexpected costs. Then we replace it when we can afford to pay it back.
I don’t really compartmentalise my savings that much. I know, Barefoot Investor devotees are fainting right now, but it just doesn’t work for me at the moment – aside from my cash savings for splurges, of course.
The only time I do use separate savings accounts is for a specific goal. Currently I’m saving for my flight home to visit family in the UK in June, so I’ve got an online savings account called ‘flight savings’ so I can put extra money (outside of my weekly savings) in there. That’s where budgeting with your calendar is helpful. You know well in advance of things you want to save for.
How do you budget?! What tracking tools do you use?