• 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

  • The budget, from hereonin

    I thought I had it all worked out. I had a fortnight with no overtime worked, and I was going to budget that amount if it was the last thing I ever did.

    And then this last pay cycle (including a few hours OT) ended up leaving me with less than in the previous fortnight. WTF?

    After much back and forth scrutiny – bearing in mind this was well after midnight, and in fact past 1am to be precise DAMN YOU ALL WHITES! – I think I pinned it down to a tax hike. Why taxes might have increased, I don’t know. I vaguely recall reading about ACC levies increasing, but aren’t they always?

    So I’m going to go with the assumption that I’ll be worse off than initially expected, and round down to $1600 to be  conservative.

    Week 1

    Rent $500
    Groceries $130
    Bills / Irregulars $110
    Remaining $60 – fun money, gas, and anything else that crops up

    Week 2

    Groceries $130
    Bills / Irregulars $110
    Remaining $60 – fun money, gas, and anything else that crops up

    Once a month I tack on $50 for our cellphones – so that’s every other “Week 2”.

    All up, that leaves me alternately at least $450 or $500 to save per fortnight. Ah, simplicity.

    So with careful shopping and budgeting, I think we can swing this. Like I say, I want to be saving more (I’l stop short of saying should) but this is how it is, for now. T doesn’t want to go back on unemployment, and I’d rather he didn’t too.

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  • Inching closer to the dream budget?

    Aaaaaages and aaaaaaaaaages ago I wrote about those dreaded PITA irregular expenditures.

    And for months now I’ve had this post sitting in drafts. We’ve gotten ohsoclose to the dream budget, veered away from it, and so on. It frustrates me. It is unbelievably irritating. But I think I have to accept that an easy life, for now, remains a pipe dream. What I wouldn’t give to be able to go to concerts! Movies! Restaurants! To buy fish and chicken and olive oil and ice cream on our grocery shops every single week!

    It hurts me to think how much money we wasted in the past, either by just not knowing where our money was going, or spending too much on, well, crap. I think the fact that the amount of discretionary income T had when he was working FT, compared to after being laid off, barely changed (ie, hardly anything at all) says a lot.

    So here’s my current dream budget, which I’m finally going to post as a kind of motivator – or something.

    • Rent – $250
    • Groceries – $130
    • Gas – $30
    • Bills account – $110
      – Power $20
      – Bus $25
      – Phone and internet $20
      – Sky TV $15
      – Insurance $15
      – Car stuff $15
    • Saving – $100 (me) – $50 (him)
    • Debt (him) $50
    • And perhaps another $100 for everything else…fun, clothes, medicine, whatever. (Hardcore budgeting doesn’t really work for me. As long as the essentials get paid, whatever’s left over is fair game.)

    Total: $920

    This is a pretty conservative ‘dream’ budget – more like a ‘cover it all’ budget. Obviously it would be nice to have more – especially in those last three categories. Right now, my take-home each week after tax and Kiwisaver is around $560 or so (I’m paid fortnightly but budget weekly.  I’ve never understood people whooping about 3-paycheck months – but I guess if all your bills are monthly then it makes sense!) – so we’re a long way from managing on one income, even without play money or repaying debt.


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  • Surviving on a fluctuating income

    When I first started trying to budget, I didn’t know how to deal with irregular expenses. I didn’t know how to deal with the fact that our income fluctuated (sometimes as much as a couple of hundred dollars – not enough to seriously derail us though). I can’t tell you how many times I gave up before realising that budgets are not static: they need constant tweaking, and adjusting mine week by week is the way to go.
    Life is easier now that our incomes have stabilised. But not everyone has the luxury of being able to count on a regular paycheck. So I asked myself: what would I do if I was facing having to live on a freelance income?


    Working out realistically the minimum I’d expect to make, and budgeting the essentials from that amount.
    In the past I was always been able to count on getting my student allowance, at least ($190 a week). If nothing else, that was enough to pay rent and buy food and a bus pass. Money over that amount would then be allotted to other things in order of priority.


    Save as much as possible in the flush periods and build a hefty slush fund
    – not just a fund for emergencies, but one to tide you over between late paychecks and unpaid invoices. If need be, you could borrow from yourself in that in-between period.

    Cutting expenses as much as possible – especially the fixed ones. Rent, utilities, insurance. Big, regular bills are the enemy of an irregular income. Then again, so are big irregular bills, hence the need for the aforementioned slush fund. It might be worth investigating whether your utilities company has a bill-smoothing option, where you pay the same amount each month based on your estimated annual bill.

    In short, most of the things anyone starting a budget should do – getting out of the paycheck to paycheck cycle and getting ahead, rather than always trying to catch up on bills. Just with a lot more emphasis on saving.
    What are your tips for budgeting on a freelance/irregular income?

  • I love ASB!

    I don’t actually keep very detailed track of my money. I use SimpleD to allocate what will be spent on what every week, and I use Fastnet internet banking to transfer money and keep on top of things. I don’t do Excel…I don’t do Money, Quicken, or other third party programmes. 33percent doesn’t support ASB, Who Stole My Money costs if you want any of the decent features, and frankly I’m wary of the security involved with downloading my financial info. It’s all just been too much effort.

    But now ASB has its own spending trackers in Fastnet!! Voila! I don’t even know how often I’ll use it, if ever. But when i saw this, I just had to have a go. I played around with it briefly tonight – so much fun! Graphs, colours, coding different types of transactions…..a PF dream.

    Screenshots… bank

    Kind of sad to realise how much we spent on ‘dining’….as well as an extensive list of categories, you can add up to four of your own. That might not be enough for some people, though.

    bank2

    Another thing I’m REALLY SUPER EXCITED ABOUT (see below right) is the fact that we can now use references on transactions between accounts. it’s GREAT news for me. I’m constantly transferring money between my accounts, and not being able to remember what each was for often got really confusing. I’d be left wondering what that $50 was for, or if I’d remembered to save bill money that week, or if I’d transferred money for groceries or if that was for the prior week. Now, I can label them “power bill” “jeans” or “insurance”. Woop woop!

    bank3

  • Irregular expenditures

    I finally got my A into G and calculated what we need to be putting away weekly for our main irregular expenses.

  • Insurance (car) – $10 approx
  • Insurance (contents) – $5
  • Water – $15
  • Car reg – $5
  • Car fund (for Warrants, oil, repairs and maintenance) approx $10-15                             = TOTAL $50
  • And I currently put aside $35 weekly for power and phone bills, which needs to go up to $45. I’d also like to consolidate all these in one Irregulars account, instead of lumping them in with my main savings account. I might also have a separate one for the car stuff (which we have been shunting into BF’s BNZ checking account) …and one day I’d like to have a Holiday account as well!

    Whether we can put this into action? Doubtful. But we’ll see how things go next semester with BF starting his course and with any luck picking up some regular part time work. For now, there is literally nothing left after paying rent, bills and buying groceries. Irregulars are coming out of savings and not really being replenished, apart from the odd extra income in months when I do mystery shopping. But now I have a better picture of where we need to be at.

  • How do you know what you can really afford?

    Apparently we in NZ are the third most indebted country in the OECD. That’s scary. No wonder we don’t get 0% financing here, or ridiculously low mortgage rates or car loan rates. I guess that’s why the default rate for a regular Visa or Mastercard is 19.95%.

    It’s sort of reinforced to me how important it is to save. Single Ma had a really interesting post recently- she wanted to go to the Food and Wine festival, but decided she couldn’t afford it.

    Even though she has money in the bank and a fully funded EF.

    So a commenter wondered, why would she say that? She can obviously afford. Surely at least she could pull a little from her savings.

    But that’s dangerous. Where do you draw the line? A concert ticket here, a road trip there, a shopping spree….keep withdrawing little amounts “just this once” and you could easily have nothing left, FAST.

    An EF is for emergencies. Fun things like shopping, holidays and festivals should be budgeted for. They should have their own savings account, not be taken from your long term account. And how do you know if you can afford it? I thought about this for a little while before coming to the conclusion: If it doesn’t work into your day to day budget, you can’t afford it.

    Like that commenter said, it’s the kind of thinking “but I have enough in the bank to cover it! I deserve it!” that keeps you living the paycheck to paycheck cycle.

    I think that’s where BF is still at, and I hope to teach him otherwise.

  • Things you know but just don’t do.

    You know what I mean. Things you know you should do, but don’t. Like recycling everything that’s recyclable, composting food scraps, using your bank’s ATMs only and turning things off at the wall.

    I’m terrible at all those kinds of things (although I am fanatic about never using other bank machines or taking cash advances; the fees are just outrageous!). I’m also thinking specifically about two big things: job hunting and budgeting.

    Job hunting

    It’s one of those mantras you hear over and over. Tailor your resume. Tailor your resume. Tailor your resume. And for God’s sake, tailor your cover letter.

    I haven’t had to jobhunt for myself for a VERY long time. But I sure do remember those days. Mass CV drops and more or less stock covering letter with each. I read all the relevant advice. I saw it, and registered it in my brain, and thought “yeah, sure that’s what I’m already doing”. But I wasn’t! I was maybe changing a verb or two here, a couple of words there, maybe adding an extra line – something generic like “happy to work weekends and evenings”. KWIM? Somehow, I thought that was being clever and tailoring a cover letter.

    When lo and behold, one day it really sunk into me that each letter really had to be THOUGHT about and made really individual, I totally reaped the benefits. I was getting replies from most jobs. I was maybe applying to slightly fewer as applications took longer, but I was getting interview offers. I never used to get responses before that – it was really amazing.

    Instead of taking my generic cover letter template, I was starting afresh every time. This made sure no two were the same and I really had to think about every single sentence. I really read job descriptions and looked out for key words, and tried to address every single skill and quality mentioned in my letters.

    I’ve been doing the same with BF. That’s why each application takes so long. I’m starting with more or less a blank sheet every time. And with him, I’m also tailoring CVs according the jobs. He’s applying for ALL KINDS of jobs, so it’s vital. Jobs in which he has experience in, I’m playing up every single relevant skill he’s got. Entry level job? Reduce his work experience and only briefly mention his duties. Add in his education details. Random jobs, well we take those one at a time and bring any relevant experience or strengths to the front. Me, I’d only ever applied for retail/customer service/hospo type jobs so my resumes were pretty much all the same. My first admin job I emailed in and don’t believe I even sent a resume, nor was one even asked for. That was a lucky break indeed.

    Budgeting

    I was thinking of a budget as a set thing. Heaps of people and books reinforce this mindset with big huge spreadsheets, with monthly or even ANNUAL budgets. That’s too big for me. We’re just beginners. I need to look at the smaller picture – get the day to day stuff under control before worrying about irregulars like insurance or car crap. Our payments are weekly and we get paid weekly, so that’s how I now do it.

    I used to think, but our income varies CONSTANTLY! This is impossible! I tried to make it work. I went off of what  a normal 40 hour week would bring in. I drew up a beautiful plan with amounts for groceries and bills and whatnot. But it just never worked out. I gave up.

    One day it sort of came to me. Budgets need to be flexible. Why hadn’t it worked for me? Why the hell didn’t I just tweak the budget EVERY TIME we got paid, to the exact amount that we had in our account? Instead of moaning about the fact that BF had had one half day and we were short by however much and this screwed up everything?

    Earth shattering stuff I know. But it’s what made all the difference. One of those things I just don’t know why I didn’t figure out/ do before.