I’ve always been good with money. I got my first job – a paper round – at 13, making something like a whopping $80 a month, and saved every dollar I earned.
I got my first real job in Year 11 at a cafe, working weekends. Then I decided I wanted to get an electric guitar, so I got another job at a call centre working weekdays after school. I worked constantly for months until I scraped together the $600 for my Ibanez and my amp, plus other paraphernalia like cords, a case, picks and the like.
I moved out of home the following year and got by with barely $20 a week to spare, but I made it work.
Then I – we – lost track a bit when T and I moved in together, throwing a car into the mix, along with other things. After a few months I sat down, went through our bank statements and was shocked to see what we were spending on food. (The first step to budgeting: tracking, and knowing what you’re spending.)
Thus began some pathetic attempts at budgeting, stymied largely by variations in numbers. Income varied every week. Rent was the same every week, but all our other expenses varied. Plus of course, there are all the irregular expenses that crop up at the least opportune times. Cue head explosion.
I would mock up beautiful budgets with colourful bars for each category. Breathless, I would log on after pay day and see how the numbers stacked up against the plan. Almost always, I would be thwarted, and give up yet again, thinking I could never make it work.
Until one day I realised something very simple. The numbers fluctuated. And so should the budget. A budget is a living document that evolves as necessary.
Instead of trying to make the money match my ideal budget every week, I needed to tailor the budget to that week’s numbers.
So simple, so obvious. Nonetheless, this was a major epiphany that cut through the fog.
Did some overtime? That can go into savings.
Lean week? Time to trim and eat in all weekend.
The next step: figuring out how to handle those irregular expenses. I sat down and calculated what power, phone and internet was costing us, as well as less frequent payments like insurance, car registration and all those other bills. I added up an annual figure and divided that by 52. Every week, I put aside that amount into a subaccount, and then draw money from it as bills come due.
Then simplify, simplify, simplify. Now that I’ve got a good system going, our expenditure in any one week is pretty predictable. Rent, groceries, petrol, bill money, and a little bit for fun – eating out, entertainment, etc. Done. It’s at the stage where I no longer budget, in fact, although I carefully track our spending every month.
In my mind, budgeting bliss comes down to three steps:
- Awareness – getting your head out of the sand about what you’re spending and facing up to the numbers
- Action - doing something about it. Tackling debt, cutting back on frivolous spending, finding ways to trim your essential expenses
- Automation – getting into a comfortable routine. Once this is second nature (I might even venture to use the term “autopilot”), you may not even feel the need to budget as such any more
Need some more guidance? I like the 60% solution – a basic formula with suggestions for how much you should spend on various things:
- 60% to Committed Expenses
- 10% to Retirement.
- 10% to Irregular Expenses
- 10% to Long-Term Savings/Debt
- 10% for Fun
And if you’re after a budget spreadsheet, Budgets are Sexy has a handy list with a ton of free templates here.
Are you a stringent budgeter, or more of a hands-off gal like me?
This post is part of Women’s Money Week 2012. For more posts about budgeting see the Budgeting Roundup