Budget Basics

Like most things if you're new to something it can be quite overwhelming as you don't really know where to start. I have found the simplest way to assess your budget it to follow these easy steps.

Before we delve into this I would like to say I am a big believer in percentage based budget allocation, this covers variances in salary and can be adjusted for pay increases or decreases. So in a nut shell I aim to have 10% for saving, 10% for emergency, 10% for investing and 70% towards debts and cost of living. As life changes these amounts can and will change, but it’s bespoke, so change the amounts to match your own goals.

Always remember, it’s not the amounts that matter, it’s the habits you’re creating by allocating your percentages to your spending that will help you succeed over the long term.

1. Start where you are.

2. Establish what you would like to achieve, what is the end goal or destination?

3. Take baby steps towards it every day.

4. Track your progress.

5. Stay consistent as with anything in life, consistency wins every time.
   

Start where you are

To know where you're going you need to have a good idea of where you're starting from, you can download our budget planner, or head over to the Aussie government's Money Smart website here and download their budget planner.

Have a look at the last two months spending habits, writing down every regular deduction. This can include things like subscriptions, food shopping, insurances, phone bills, etc.

On the budget planner enter your expected earnings and list your outgoings, this will give you an idea of where you currently stand with your regular spending habits.

Establish your end game

Set goals, it doesn't get much more simple than that.

What is it you would like to change in your spending habits so you can either save more money or have more time and freedom.

If you're looking to cut spending, get out of debt, build wealth, buy a house or save for retirement just to name a few ideas, then it's worth having a budget you're working towards and a plan to achieve it.

Take baby steps towards it every day

Some of the best words of wisdom I have received was in order to achieve goals, it takes hard work, but to not achieve your goals ends up being hard work too. So choose your hard.

It may seem daunting that it’ll take say 2 years to pay off credit card debt, but guess what, the time will pass anyway. If you don’t start today, then it may well take 2 or more years from when you do decide to start clearing it.

It takes discipline to get to where you want to go, but spend 90% of the time focusing on the journey getting there and not the end goal, because the end result will essentially achieve itself when you follow the plan you’ve set out.

So from a budget point of view, this could look like taking lunch to work for 9 days out of a 10 day fortnight, it can look like putting any additional money straight onto any outstanding debt instead of looking for ways to spend it as a treat yourself moment.

I’ve got a few more wallet friendly tips if you want to read more here.

Track your progress

Any goal worth having is a goal worth measuring. We all know life happens, you’ve finally got some money saved and your washing machine breaks down, or your tyre blows out, or something unexpected happens. These expenses should be paid from your emergency fund. This is why it’s super important to set realistic goals.

As they say you should set smart goals:

Specific

Measurable

Attainable

Relevant

Time based

In your budget set aside a percentage that goes towards your emergency fund and this money will be about covering your unexpected expenses as they come up.

Have regular check-ins with yourself or you and your partner. See how well you’ve done, celebrate the wins and think of ways you can troubleshoot where you may have gone off track. Did you manage to save the amount of money you wanted? Did you pay down your debt? Is your plan on track or did the wheels come off somewhere and how can it be achieved the next time?

Stay consistent

Anyone who has ever tried to go on a diet will know that consistency is key. For me, at my biggest I hit 106kg on the scale, on someone that is around 165cm I can openly say I did not feel healthy at all. When I tried to go on a diet the most frustrating part was not seeing instant results. The biggest lesson to learn is to be patient, I didn’t get fat overnight, so I wasn’t going to lose it overnight.

Most people don’t get into massive debt overnight, it’s usually years of accumulated bad spending habits that result in being in significant debt. The best way to resolve this is set a daily reminder that success isn’t achieved overnight, be kind to yourself and understand that generally these habits are hard to break, and take it one day at a time because eventually consistency will win. This doesn’t mean you get a free pass when you crack, but it does help you be a little more kind, so if you fall off the wagon, jump straight back on, don’t think because you’ve fluffed in a moment of weakness it’s now a free pass for the rest of the day and you start again tomorrow, nope, jump straight back on.

Just remember, I believe you can do it, you need to believe you can do it too.