I Set My Very First Budget And Here’s What I Learned

I thought I was good with money, then I looked back over my purchases and decided I needed to get serious. I was sick of being broke, so last month I challenged myself to give budgeting a red-hot crack. I sat down with a friend who helped me plan out my first budget. Here’s how I did it.

Step 1: Assess the damage

The first step on your journey to becoming a put-together adult human starts with a trip down memory lane, otherwise known as your transaction history. Kill me now, right?

I always thought I wasn’t too bad with money. Sure, sometimes I had just 30 cents left the day before payday but that’s normal, right?

Seeing in black and white exactly where your money goes is enough to make you reconsider your life choices and maybe go cry in the shower for a bit. But it’s necessary in order to identify realistic changes you can make.

Mine was pretty rough… eating out instead of prepping meals, and catching Ubers and taxis instead of public transport were major killers. Looking back let me see what were essential purchases, what I could reduce and what I could cut completely. With this in mind, I made a plan for how to use my money going forward.

Step 2: Separate and allocate your funds

The second step in creating your first budget is determining where your hard-earned dough will go. I did this by divvying up my income into three accounts for specific purposes: living expenses, play money and savings. This meant that I had to open a new account for my play money, complete with a new debit card. Sounds like lot of effort but it was so worth it.

I’m paid monthly, and the day that blessed direct deposit hit my account, I chucked 60% of it – the amount I decided I’d need for essential purchases ­– straight into my living expenses account. This is for life expenses like rent, utilities, bills, groceries, and public transport – anything I’d deemed a necessity.

Next, 20% went into my play money account. This is the money I could spend on beers, going out for dinners, or treating myself.

The last 20% of my pay went into a savings account that I tried my best not to touch.

The lines can become easily blurred when cataloguing the stuff you spend money on. Does buying your lunch at work count as a living expense? Is your morning coffee a necessity?

Answer: it’s up to you. When I set my first budget I was ready to seriously change my spending habits, so I was pretty strict. If there was ever a cheaper alternative to what I was doing (like packing my lunch instead of buying it) I paid with my play money, not living expenses.

Step 3: Flex your willpower

So your first budget is set, your money has been divided into its respective accounts. Now what? The easy part’s over, and you have to stick to it.

For me, having separate accounts gave me an indication of how much I could spend, and helped me not spend beyond my means. Knowing I had ‘x’ amount of play money to last me four weeks helped me spend it more sparingly to make sure I wasn’t left short.

Similarly, being able to see that sum sitting in my savings account made me more motivated to stick to my budget. It acts as the reward at the end of the tunnel – be good and financially responsible for the month and know you have not touched that sum of money.

The take away:

Budgeting is hard and takes dedication and willpower, kind of like breaking a bad habit.

Having separate accounts certainly helps, and ensures your living expenses aren’t compromised. If you spend a little too much, you just have to cut back a little until payday.

Although I was a little sucky at budgeting, it was a roaring success in my books. I now have money in my bank account that exists in savings. Savings! Who’d have thought that was possible? I’ve discovered that budgeting is a skill that needs practice to master, so bring on next month.

Bradley is a writer from regional NSW and he didn’t come here to make friends, he came to win. He tweets infrequently to his 43 followers @bradjohnston_.

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