How to Take Control of Your Money: Budgeting Series Pt One
The only way you can Take Control of your money habits and spending/saving behaviours is to first understand what you are doing right now and have done in the past.
The best way to do this is to look at the numbers over the last three to six months, because numbers never lie, when memory and previous experience can be muddled.
I have found over the last ten years owning a sole trader business and having to do all the books myself, that you will be surprised, even ten years in, with your actions when it comes to spending.
Step 1: Do an audit of all your accounts.
The most important aspect of planning for a budget is to understand what you are doing right now and in the past, therefore, doing a full scale audit is really important.
Although it is the most important part, it is also the most boring for most people and why most people will always struggle when it comes to budgeting.
To complete an audit, you need to gather up the last three to six months of bank statements from all accounts, including your partners if you have one (always work with a budget as a team, which means there is no “I” in team").
Create the categories for each month of where you will be inputting the spend, an example of this would be groceries, take-out, mortgage/rent, kids schooling, self-education… The list can be as long as you make it, but I will provide a list I use of my own which is super comprehensive at the end of this article that you can look out for.
Understand how you work, do you need a highlighter to cross off all the transactions you have inputted? Do you need multiple highlighters for each category? Are you like me and would rather input as you go through each line of transactions? By being able to understand what works for you, it will be quicker and more efficient!
Input all transactions, no matter how tiny they are, it is imperative that you do this, even if it is just a $1 chocolate bar from the supermarket.
Lastly, you need to make sure each category is tallied up, in this I use excel. Which has functions such as Sum that will calculate all the totals up for you. Excel makes life a lot easier and quicker to create a budget and to track your spending, I would highly recommend it!
Step 2: Decide on what you want to do with the information now gathered!!
Almost as important as step one is working out what to do with the information you have organised. Have you got a surplus of cash/savings at the end of each month? Do you spend more money than you make?
Or do you just break-even?
Step two is where you can have all the fun, or it could be where you need to have tough conversations with either yourself or your partner. If you have just broken even, are you content with that?
Do you want to build up a cash reserve for emergencies? Do you want to save for a house? Having a child? Retirement?
Do you just want to be able to get away and see the world?
I can guarantee you, everything you ever dreamed of doing, all of it comes down to money and being able to use money wisely. If you have a goal you want to achieve, if you have something you want to do, you will need to have cash to do it. That is why, it is a great idea to talk to a coach or a Financial planner, who can help you with drawing out what you truly want, how to make your life better.
You can talk to friends and family, however, having someone who is not bias is an extremely important asset to have, someone who only has your best interest at heart.
One thing I have learnt, as much as you love friends and family, they do not always have your best interest at heart. Not out of malice or evil intent, in fact it is because they love you that they can sometimes offer bad advice.
Step 3: Now you have decided what you want, set REALISTIC goals!!
Setting realistic goals is paramount to budgeting success, you cannot maintain a budget if you blow it every month. You will just get disheartened and will dread reviewing your numbers every month. (Step four by the way.)
To do this, you need to look at creating a SMARTER goal (Specific, Measurable, Achievable, Relevant, Timely, Evaluate and Review) surrounding lifestyle, finance, education, career and relationships. I would suggest choosing one category to work on first, do not overwhelm yourself. Stick to one thing only until you get better at it!
Of course, you may not achieve said goals all the time, however just by purely setting the goals, you will at least be moving towards the life you want.
Step 4: Commit to reviewing your budget and goals every month!
Once you start on this path of Taking Back Control of your money, the most important aspect of the journey is to continue it. Between the age of 25 to 28 years old, our spending habits and savings rate has changed dramatically. We are constantly changing our budget and our numbers, therefore, you need to know them to be able to change them and keep up with the consistent changes.
If you are not good with finances, that is ok, you can ask your partner to do it, like I do for my wife. However, you need to make sure that you are open and transparent with the financial decisions. Otherwise, you could always hire a professional to help you with regards to this as well, such as a Financial Planner or coach.
Step 5: Take Action
Lastly, but definitely not least, YOU NEED TO TAKE ACTION!
There is no way around it, you need to put in the work if you want to reap rewards, you can outsource if it is not your strong point, but you will still need to do some groundwork.
I hope that the above will help you on your journey to taking back control of your finances,
Please see below the budget planner, and if you would like a copy, just submit your details below,
Until next time,
Take Back Control
