Always Broke? We Break Down Budgeting In Five Easy Steps
Like most chores in life, starting a budget seems like an insurmountable, terrifying task, until you just roll your sleeves up and get stuck into it.
An old Chinese proverb says: The best time to plant a tree was twenty years ago, the second-best time is now. Yes, saving money is hard and yes, it sometimes sucks. You’re not alone. But if you don’t have a budget the only person you’re letting down is yourself. Do future-you a favour, and make present-you sit down with these super easy starting tips.
#1 It’s easier if you have some spending history to start with
How are you supposed to sit down and make spending (or saving) goals if you don’t already know where your money is going? Knowing yourself is a prerequisite for improving yourself, and it’s the same with finances. Tracking spending – even just for two weeks – will put you in a much better position to make a realistic and informed budget for the future.
#2 What are you saving for?
A holiday? A car? A boombox? Print out a picture of it and put it in a frame on your desk. Print out a tiny picture of it and put it in your wallet like people do with children. Make it your phone background or lock screen. Wherever you look regularly, have some kind of reminder of your aspiration there. Consider this part of the “starting-to-budget” process.
(Secret tip: Sticker charts are not just for children. Gold stars make everyone feel good! Give yourself little rewards for hitting medium-term savings goals.)
#3 Know your goals – both ideal and real
Budgeting is a bit like weight loss. If you set unrealistic goals and expectations, you’ll go too hard too quickly, deny yourself all the things that make life delicious and fun, and it’ll be unsustainable and you’ll boomerang back to cash-splashing.
People often talk about a “rule of thirds” (that of your income, one-third goes to mandatory expenses like rent and bills, one-third goes to optional but reasonable things like birthday presents and chocolate, and one-third gets saved) but for a lot of people those generalisations just aren’t helpful. If you’ve already tracked your spending then the places you could cut back may be clear. Another idea is to look at when you’d like to achieve your savings goal (a Christmas holiday, for example?) and calculate how much you’d need to save each week for x months to reach the goal. If the result is that you’d need to put away half your income, then you might need to re-assess your goals.
The best budgets also include a little flexibility for the unpredictable parts of life. If your spending blows out one weekend because it was your mates’ wedding, don’t give up altogether! Start being good again on Monday.
#4 Make sure your partner, best mate, parents and/or pet know about your budget
If you’re dreaming of Ibiza in December but your main squeeze still wants romantic getaways each month in between, things will get tricky real quick. If your best mates keep asking to hang out at fancy cocktail bars but you haven’t told them your car needs new tyres, you’re not gonna have much fun. Our lives don’t exist in vacuums and neither do our finances. Let the people around you know your goals and plans, and you’ll find sticking to a budget much easier with their support.
#5 Open a second online account for yourself, or give cash a go
Time to get pragmatic. If you don’t already have one (*tisk tisk*) open an online-only savings account and name it after the thing you’re saving for. If your goal is reasonable and your pay date regular, set up an auto-transfer on the date your pay is processed, or just set a recurring reminder on your phone to do so. Having a second account without an associated bank card (so you can’t spend from it) is absolutely critical to saving money, and as the savings increase it gets really exciting. Heck, why not find an account with good interest too? You’re a big kid now.
If cash is your thing, don’t overlook the good-old envelopes method. You know the one. Take the total amounts you’ve allocated for spending – groceries, entertainment, transport – and label envelopes with the categories and amounts allocated. You’re guaranteed to feel the spending more keenly when it’s in cash, and if you’re at the end of the week with an empty envelope marked “Beer” you’ve got nobody else to blame.
Bri Lee is a Brisbane-based writer and the Founding Editor of Hot Chicks with Big Brains. Her first book, Eggshell Skull will be released in early 2018.