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Write Down How Much We Get Paid Per Pay Period There are also a bazillion budgeting apps you can use if you prefer.ġ. I get fancy with spreadsheets later, but a pen, paper and calculator are easy first up. I start with a piece of paper, a pen, and a calculator.This helps us work out our income and budget for the bills etc. Log into our bank and download a year’s worth of statements for our transaction accounts and credit cards.Track expenses for a month and categorise expenses as explained in this article.Here’s what we do before creating a budget: Before changing our budget, we focus on adjusting habits, and when we see results from creating saving habits, we adjust our budget accordingly and save more. So here’s what I’ve found to be the foundation of our budgeting success. It can be an eye-opener just how much small expenses can add up!īudgets are more accurate if they are based on actual spending patterns, even if the aim is to reduce spending.įor example, budgeting how much money you intend to spend (or not spend) on work lunches doesn’t mean much if you don’t get into the habit of taking your lunch to work. So, if you’re not sure how much you spend, it’s easier to do an expense tracking exercise for a few weeks (you don’t have to do it forever) to get a handle on your REAL spending. But I have a few useful tips that helped us before I begin… Useful Data Before You Start a Budgetįor a budget to be useful, it needs to be based on actual spending patterns.Īfter years of budgeting (including creating budgets for other businesses as part of my job), I’ve found wishful thinking doesn’t work. (*We get paid fortnightly and monthly, so I budget some expenses fortnightly, like groceries, and some expenses monthly, and we cover all the expenses between us.)īelow I take you through the steps I use to create a budget. You can do this monthly (and if you get paid monthly, a monthly budget makes sense), but I find it’s easier to budget for a pay cycle. That means deciding how to spend your pay before you get it. I use automation, so I don’t have to track every cent we spend.Ī budget is a plan for your pay.I couple my budget with a modern envelope system so I don’t have to worry so much about big bills throwing the budget (except when the prices go up a lot!).I have a “Yes!” buffer in my budget, which I’ll explain below.My budget is based on a pay cycle rather than a month.*.Here’s how the budgeting system I use is different: While the budget I use is similar to a zero-based budget, it varies in some critical ways. The good news is I found a better way to budget that turned failure into saving success. I believe the problem is how traditional budgets are built (at least, how I was taught when studying accounting). This is going to sound a bit dodgy, but I no longer think the problem was me.
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That’s right! I failed to stick to my budget 100% of the time.
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I used to prepare an elaborate budget (because I used to be an accountant and still love spreadsheets) and then track my expenses to see if I stuck to my budget or not. You create another budget (again!?) and do it all over. The next step is to track all your expenses during the month to make sure you stick to your plan. This type of budget is good in that you’re being proactive with your money and making every dollar count.īut it can be hard to stick to and a lot of work because… In other words, every cent of your income is allocated in your budget to either savings, living expenses, or debt repayments. Income – Savings – Debt Repayments – Expenses = 0 It’s zero-based because when you take your expenses/savings/repayments away from your income, your budget should equal zero. Then you deduct your expenses from your income. In the standard zero-based budget, you create a budget every month by adding up all of your income and then adding up all of your expenses, savings, and debt repayments. You should always consult a qualified financial expert when making money decisions (not a random stranger on the internet like me – or even your mate at the pub).īut before I get into my system, let me briefly explain how the standard zero-based budget works. In this blog, I share my savings and budget planning and what works for us. It’s similar to the standard zero-based budget, but there are a few key differences that make it easier to manage.ĭisclaimer: This is general information only. In this article, I’m going to share a variation to the zero-based budget – one I find more effective for our situation. It was popularised by the American personal finance bloke Dave Ramsey. You may have heard of the budgeting system called a zero-based budget (if you haven’t, I’ll describe it below.)
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Looking for a way to create a simple budget? In this article, I’m sharing the one that works for us.