A budget is a indication of known expenses and income over a set period of time. For some, the concept of a budget is scary, rigid, or sketchy! Personally, I love budgeting! Mine is neat, specific and colour coded. The summation of this information, using it and tweaking it to be able to achieve my goals is fun for me! I can easily see the information I seek and know if we are on track to achieve the goals we desire. It may not be so fun to look at if you’re budget is incomplete or unclear. So I thought I’d take this opportunity to chat about ways I utilise.
First, open up Excel or grab a piece of paper and a pen. Write down your income for the week then a new column for month then another for yearly income. If you work casually, you might like to do a conservative average income.
Then write your expenses in a column underneath. I’m talking everything from food, to rent/mortgage, phone, internet, electricity, water, fuel, insurances, car payments, hobbies – everything! Everything and anything you spend money on regularly or at some point through the year.
If you’re unsure how much you spend on fuel per week, try tracking it over a month period. Have a look at the receipts, divide the total cost over the four weeks to give you an average. At that point is also important to consider if the amount of driving is what you would normally do. For example, if one week you drove an hour and a half to the beach 3 days in a row the amount is likely to be on the higher side so you might be able to reduce it slightly to account for that. Similarly, if you went away and didn’t use your car at all one week, you might like to bump the number up to get it close. At this point, it is just an estimate to give you a number to work with. A budget is never static, as your life, goals and activities change so should your budget!
Just as the income has weekly / monthly / yearly columns, I’d also suggest you do the same for your expenses. Then add up all your expenses in each of these columns. Take your expenses away from your income and you’ll find a number left.
There are a couple of ways this number can go. The first is you’ve got plenty left after your expenses every week / month. The second, is you have little or negative left after your expenses. Let’s take a look at both.
If you have a bunch of money left after your bills – great! Let’s chat goals. What goals and dreams do you have? Perhaps you’d like to go to Japan. Or buy a house. Or not stress about money at Christmas / birthdays. Working these goals / dreams into your budget means you can achieve that! So now is a great time to set aside a dedicated amount every week / month to achieve these goals. Just as you wrote out a list of expenses in detail, I suggest you do the same for your savings. For example, Christmas, birthdays, house or holidays. Whatever titles match with your personal goals. For some, “Christmas” might seem ambiguous – how do I know how much I spent at Christmas?! Instead of tracking how much you spend next year, I suggest you think of a reasonable amount to spend and then multiple that by the number of people for whom you buy presents. Be sure to build a little buffer room in there for wrapping and cards if that’s your style. This way you save maybe $20 a week every week of the year and when Christmas rolls around you’re not freaking out about the amount you need to spend because it’s all sitting there! Other options for savings are voluntary super contributions, high interest savings accounts and depending on the amount you have saved investing. Those who had little / no money left, I still suggest you do this step but it is more realistic to examine ways to make your budget healthier before doing so. If there’s not a whole bunch left after your expenses come out? Check out this blog post about how to reduce your expenses “Budgeting – Reducing the Red, Bringing back the Black”
At this point, I suggest a summary table and some totals. Start with the totals. Ideally, you’d like a total of income. This is more relevant if you have multiple income sources. You might be creating a shared budget with a partner, or have an investment or government assistance in addition to a job. Regardless of your situation, a total column will summarise your income into one easy number. Or three in this case as you want a total for weekly, monthly, and yearly. Then total your expenses – again for each column. The reason I suggest three columns is because the time period an employer pays varies, as does bill paying (phones/fuel/electricity). Then one last time, total your savings.
Now a summary table! This should be as simple as you can make it, for example bills, weekly spending and savings. This will mean when you open / look at your budget you know exactly how much needs to go into each account giving you – a quick overview.
It’s as easy as that! Remember to update your budget when your income / expenses / goals change and you’re set! Happy budgeting!
*disclaimer, this blog is written by a budgeting enthusiast aimed at your average person. If you have serious debt, I suggest that you seek out a financial counsellor / planner or similar to help you balance your budget*
Author: Rachel Fredericks
Rachel Fredericks is a practicing Catholic, a wife and mother of one (two if you count the 2yo puppy). She’s currently studying her Masters of Organisational Psychology as well as bringing up her darling daughter who just turned one! She enjoys good conversation, quality time with family and friends, going to the beach or a run and reading good books.