Budgeting! The very mention of it makes us wince. Why? Well, I reckon it’s because budgeting confronts us with just how much money slips through our fingers - and what little we have to show for it. But that’s one of its purposes - getting a kick in the backside is sometimes good for us.
Let’s get real here. You need to be honest with yourself. Many people refuse to genuinely acknowledge how much money is going out the door. The starting point to getting your finances under control is to do a budget and to be completely honest with yourself about how much you are actually spending.
KEY THOUGHT - Until you can measure what money is going where, you don’t have control over your situation.
How confident are you that;
If you are not confident, the solution is right here.
Download the free budget planner from our website here (this is the best budget document I have used in my 30 years in the business).
A few tips!
Choose a time period for your budget that makes sense to you - for example, a week, a fortnight or a month.
It is helpful to look at the money going in and out across a whole year. Checking your bank statements, bills, credit card statements, receipts and shopping dockets will help you to work out all your expenses. Use your best guess if there's anything you can't find or if bill amounts vary across the year.
Add in all the money that you receive or are paid over the time period. This could include your pay from your full-time or part-time job, any casual work, pension, government benefits, child support payments and any money from investments. If your income is variable, make an estimate based on your past year's earnings.
When completed, you will be able to see the bottom line - are you sinking, swimming or just treading water?
When you know your spending habits, you can make informed decisions about what to do about them.
Now for the really important bit. You need to track your spending to keep it in line with your budget. The great news is that technology is on your side. There are any number of apps for your phone that will make this task much less of a chore.
A popular one is provided by the Government’s MoneySmart website called TrackMy Spend. ‘TrackMySpend’ allows you to nominate a spending limit, separate needs and wants and categorise outlays (it recently won a national award for government services). I know many people who use Pocketbook Personal Finance Expense Tracker and rave about the results. Most banks will have a tracking tool as part of their Internet banking service. Check them out.
For those already using Xero for their business, I have several clients who use it to reconcile personal accounts too.
Here is a list of other digital helpers if you want to look further.
Damn Budgets Don't Work For Me
How often have I heard that budgets don’t work?
In fact, if I had a dollar for every time someone has told me that, I wouldn’t need to do one myself - the money would just be rolling in!
I know for some people that a budget just hasn’t produced results. The main reasons I hear are:
If you’ve tried to budget and it didn’t work, ask yourself if the budget was realistic in the first place. If you don’t think it was, give it another go.
Let’s be honest though, for a large number of people, for all sorts of reasons, budgets have not and will not work.
So what do you do?
Well, you can stop flogging a dead horse and try something different.
Look at the anti-budget instead here.
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