How I FINALLY learned to budget: The long road to budgeting bliss

How I learned to budget

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.

Amazing, right?

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

10 thoughts on “How I FINALLY learned to budget: The long road to budgeting bliss

  • Reply Sense March 8, 2012 at 19:30

    Ah, you are better than me. I could not operate with irregular income/spending!! It would drive me absolutely insane! I like the 60% solution, though I tend to try to compete against those suggestions instead of use them as a guideline.

    While getting out of debt, I was stringent. Now, I’m on autopilot. My inner ‘spend gauge’ regulates me subconsciously, so while I don’t need it to keep me on track each month anymore, I still track the numbers after spending because I like it. I’ve trimmed my needs/wants down to a place where I no longer feel deprived of anything. It feels luxurious, in fact, to feel like I can go and spend to my heart’s content (which is regulated by that spend gauge, referenced above), and I still end up saving a little/lot each month. I owe all this to the fact that I am very very slow to upgrade my lifestyle/needs/wants, so they’ve barely grown since grad school, when I was making about half what I do now. 🙂 It is surprising how your life changes when you operate from a place of abundance vs a mindset of scarcity.

  • Reply Michelle March 8, 2012 at 19:40

    Being realistic is definitely a big step in budgeting! We used to go way over board with food (almost $2,000 a month spent on food when we were only 18). It was insane. We are much better now.

  • Reply Leigh March 8, 2012 at 21:02

    I think I’m a more detailed budgeter than you, but I’m probably comparable in how hands-off I am. I have a lot of rows in my budget spreadsheet, but honestly, most of them are forecasts of what I’ll spend and if I want to spend more than the planned amounts, I evaluate if it’s in line with my financial priorities and then adjust the plan accordingly.

    I’ve been working with this system for almost two years now. I would say that the numbers are pretty realistic for the most part, but I don’t really chastise myself much when I go over them. I mostly use my spending plans for savings projections rather than for keeping my spending in line since I do that naturally.

  • Reply Zoe @ecothrifty March 9, 2012 at 03:24

    Sounds like a really sensible system. We do something very similar in our household and it has worked really well for us!

  • Reply postmoderngirls; March 9, 2012 at 03:37

    I am awful at budgeting. I always mean to sit down and go through all the bills I save, but I have excuses. So, so many of many of them.

    I used to be much, much better when I was at uni- I didn’t really have a lot of money to spend (not that I do now either) and I was extremely careful about how I did spend it.

    I suppose that now that I have a steady job and I live in a country with a rather low cost of living, I’ve been taking it for granted. Since I’m moving to another country with a much higher cost of living and the same pay, I have to start budgeting again. No more wasting money on things I really didn’t need, and walks I skipped for a more convenient taxi.

  • Reply Shawanda @ You Have More Than You Think March 9, 2012 at 09:10

    I like to keep committed expenses as low as possible. If I could make them 10% of my income I would. That way I’d have more to put towards savings and fun.

  • Reply Aloysa @ My Broken Coin March 9, 2012 at 10:51

    I budget and then I don’t. I think it is love/hate relationship that we developed with each other. I’d rather just try to contol my spending. Seems easier and more efficient.

  • Reply Tracey March 9, 2012 at 13:09

    I have a bills account too. It makes life so much simpler. I try to over-budget slightly, especially since I know my next house insurance bill will skyrocket (though by how much I have no idea!) I also put a set amount aside each fortnight for car wof/rego/repairs and gifts. Took a while to stop myself pinching that money for other goals, but once you get into the habit, it becomes second nature.

  • Reply Link love (Powered by feta cheese and an afternoon at the races) | Musings of an Abstract Aucklander March 12, 2012 at 19:32

    […] carnival of personal finance; Sense to Save has done an awesome job of it, and my post on reaching budgeting nirvana is in there […]

  • Reply Complete Roundup Of Women’s Money Week Posts March 13, 2012 at 13:26

    […] The Long Road to Budgeting Bliss […]

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