We’ve all been guilty of thinking “I’m going to start a budget and stick to it” and then said budget never makes its way into our spending habits. We get it, budgeting can be tricky and a little boring. Or you start creating yourself a budget that's way to unrealistic and restricts yourself too much that you aren’t going to follow it.
Because we’ve been there, done that. Here’s our guide on how to budget without the overwhelming restrictions.
1. Start by listing your income and expenses
To start the process, create a list of your income and expenses. From here you can determine how much money you have left after you pay for your essential expenses (e.g. rent, insurance, car bills, power, internet etc.). Work with a timeline that suits you. It’s often easier to work out how much you pay for expenses for each your pay cycle e.g. weekly, biweekly, or monthly.
This is also a great step to get clear on what your essential expenses are and how much it costs you to maintain your living expenses. And, can be a helpful indicator if you’re thinking about building up an emergency fund.
2. Review your regular transactions outside of your essential expenses
Screenshot or print out a copy of your transactions over the last 1-3 months and get a view on where you’ve spent your money on non-essential transactions. We like to categorise these transactions to make it simple. Then within each category, rank your transactions from most important to you to the least. This is a great exercise to keep yourself in check with your spending and if you are spending without thinking about your purchases.
This list will be specific to you, however, here are some category ideas to help you begin:
- Entertainment (eating and drinking out etc.)
- Subscriptions (Streaming services, gym etc.)
- Personal care (Non-essential such as luxury items)
3. Determine how much you can save and look at it as an “expense”
From here, you’ll be able to determine how much money you have left over to save. And, if you want to reach your savings goals faster, where can you cut back on unnecessary spending. Perhaps you can cut back on some of the spending that you ranked the least important from step 3. Don’t know where to start? Lunch and coffee out or UberEats are often the easiest transactions to cut from your spending.
If you want to get serious with your savings, treat your transfer of money from your Everyday account to your savings as another expense. This will be help you to make saving a habit and have the sense that saving is something you must do rather being optional.
4. Make sure to give yourself some money to spend on the things you enjoy
We’re big believers in balance and maintaining your motivation to achieve your goals and keep good money habits. When you’re cutting back your spending, ensure you still have room to do the things you enjoy. Whether that’s your gym membership, a weekly catch up with friends or a hobby.
Creating a budget is only effective if you can maintain it over time, which becomes harder when you restrict yourself too much and you can’t enjoy the process.
5. Figure out ways you can be smarter about your money
Get crafty with some of the ways you can save a few dollars here or there. Perhaps you can assess some of your bills (power, internet, phone etc.), where often you can find a better deal for switching companies or perhaps the company you currently use is now offering a better plan than when you first signed up. Set yourself a reminder yearly to check for better deals.
Also keep an eye out for increases in prices on your regular expenses. These can all add up over time and may mean you need to check if you’re still reaching your savings goals.
Note, the above information is a guide only and should not be relied on as personal advice it does not take into account your personal financial situation.