Budget smudget


Budgeting = boring. Honestly it really can be boring so I do sympathise as to why so many people do not even have a loose budget. The thing about budgets though, is that they tend to work.

Now I am not saying everyone should have a detailed spreadsheet like some nerdy financial planners (guilty as charged), but having a loose idea as to where your money goes is a pretty good idea, and I’ll tell you why.

1. A good budget doesn’t actually have to be restricting. People tend to think that a budget is restricting, which isn’t necessarily the case. Just be realistic when you write it. If you know that you can not go without your coffee on the way to work, or that you will definitely be spending $40 a week on magazines, then include it in your budget. There is no use in lying to yourself and saying that you won’t spend the money when you will.

The good news about being realistic is that you no longer have to feel guilty for overspending on ‘unnecessary’ items, because you have set aside the money specifically for your bow tie collection or cheese addiction.

2. You get to go on more holidays. From my experience with friends and family, the people who do budgets have more holidays. Why? Because they put the money aside for it. That means each year, they have a lump sum of money and say ‘hmmmm where should we go this year’. The ones who don’t budget tend to wait years in-between holidays and still struggle to get there when they do decide to go.

I am big on holidays and am happy to put a large portion of my budget towards the cause so that my husband and I can take a holiday every year. Some people may not feel comfortable with a large holiday fund, but as per point 1, I am being realistic with myself, and therefore plan for the large spend. I’m currently on a countdown until Bali, woot!

3. You’ll have more money. Research shows that those who budget are wealthier. Being consciously aware of where your money goes, generally helps you to make smarter decisions. That doesn’t mean you have to go without, I can’t stress this enough, its just about being accountable to yourself.

The main place people fall down is the way in which they write a budget. Firstly they figure out how much they would like to save, then they figure out how much is left and try and work their lifestyle around that. This is the wrong way around and usually leads to failure.

Firstly, figure out what your lifestyle requirements are. Literally list every thing you like to spend your money on, for example: rent, clothes, food, subscriptions, going out, gym membership and so forth. What ever is left over, should go to savings. Now, if you are spending more than you earn, well then you need to have a heart to heart with yourself and realise your lifestyle does not match your earnings. If you are doing this, you will never get ahead, and you may need to get someone to help you with this process.

4. There will be less unexpected nasties. Whilst I don’t really think there should be a prescription for budgets, and everyone’s should be different to suit their needs, there is one aspect that I swear by… the ‘over flow fund’. I wish I could take credit for this one, but my husband came up with the name. We allocate a couple of thousand dollars a year to this overflow fund. What is it for? Well think about what you would do if the washing machine dies, the couch breaks, or you have a very large unexpected phone bill from texting whilst in India. These are the things you can’t necessarily budget for because they don’t happen often, but when they do, they are usually quite expensive.

So instead of living on 2 minute noodles for the next 2 weeks to pay for it, the overflow fund helps, and it means we don’t have to go without the necessities. At the end of the year, if we haven’t used that money, guess where it goes?….. you guessed it, the holiday fund. Winning!

– This post is from our resident senior financial planner, Cara Brett. Check out her details in our about us page.

Posted in: Financial Planning and Cara Brett

About the author: Cara Brett

Cara Brett proudly heads up Bounce Financial - founded in 2014 after a successful, decade-long career in the financial services industry. Cara’s experience encompasses both the financial product and financial advice sides. This gives her a comprehensive and holistic knowledge of all facets of financial planning.